There's an interesting economics experiment going on in Hawaii. A first-in-the-nation state cap on gas prices went into effect last month, and residents have already ...
There's an interesting economics experiment going on in Hawaii. A first-in-the-nation state cap on gas prices went into effect last month, and residents have already greatly changed their gas-buying behavior.
The state sets wholesale gas prices each week, but--and here's the intriguing part--officials announce the new price five days before it changes. So people start making re-fueling decisions based on whether the future price will be higher or lower, and by how much.
Take last week, when the state announced on Wednesday that gas prices would drop by 44 cents a gallon the following Monday. Drivers responded by scrimping on gas while they waited for the price to fall.
This created some odd side-effects. Drivers who miscalculated their gas needs were left stranded on the side of the road. Then, once the price did drop, drivers swarmed gas stations to get the cheaper gas. Several pumps were drained dry.
There are cases when you can expect the price of a good to change. If you read an article about how milk prices are going to rise, for example, you might guess that ice cream's going to be more expensive the next summer. And it's a safe bet that the introduction of a low-cost airline into a new market will drive some other airlines' fares down.
But it's rare for an entire population to know exactly when and by exactly how much the price of something is going to change.