Why a larger proportion of customers would be driving

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On a recent trip passing through the Cattaraugus Indian reservation an observer noted several gas stations selling gasoline 30¢ per gallon cheaper than in Buffalo, NY and its suburbs (the reservation is approximately 30 miles south of Buffalo, NY; 16 miles from the nearest suburbs of Buffalo). The observer also noticed a surprising number of RVs and trucks pulling boats at these gas stations.

Question 1: Use concepts discussed in class to explain why the Indian-owned gas stations would price 30¢ lower than competitors (rather than a smaller price differential) and why a larger proportion of customers would be driving RVs or towing boats. Note: The gasoline sold on the reservation is indistinguishable from gasoline sold elsewhere (i.e., there is no quality difference).

Reference no: EM132995128

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