Algorithmic Pricing On Amazon 'Could Spark Flash Crash'

DerekduPreez writes "Sellers on Amazon's retail site are increasingly using high-speed algorithmic trading tools to automatically set prices, which could lead to a malfunction similar to the 2010 flash crash. According to the Financial Times, prices on Amazon's website change as often as every 15 minutes, where sellers are using tools traditionally developed by data miners at banks to ensure that their prices are always below their rivals'. Third-party software is allowing sellers to detect a competitor's price and automatically undercut that price by, for example, £1. However, this could lead to a situation similar to the U.S. flash crash, where algorithmic trading was blamed for stock prices falling to near zero and then bouncing back within 20 minutes." At Slashdot's sister site for Business Intelligence, Nick Kolakowski has some more information on this possibility.

Comments

Falling to near zero??

[bhlowe]

I didn't read the article, but presumably the traders wouldn't allow their sale price to drop below the cost of the item plus the marginal expense to sell on Amazon.... so if anything, the prices will drop to at or near the cost of the item... Which is good for buyers, bad for resellers...

Re:Falling to near zero??

[jpmorgan]

And if they do, it's still good for the buyers, and the sellers aren't likely to make the same mistake twice.

With algorithmic pricing, the Amazon marketplace is just operating as an automated dutch auction. It's how markets should behave: raw supply and demand, with no collusion or other market distortions propping up prices.

Re:Falling to near zero??

[MortimerV]

Exactly, a floor price is used to prevent this sort of crash from happening. I'd imagine there could be some sellers on there that haven't set up their floors properly and they could lose money on a few products, but the entire site won't implode from this.

If those sellers don't honor the prices, they'll get bad user ratings and lose some future sales over it.

Re:Falling to near zero??

[N0Man74]

Floors are good, but so are ceilings.

Amazon’s $23,698,655.93 book about flies

Re:Falling to near zero??

[History's Coming To]

You'd be surprised, there are many businesses built around a model of selling at a loss for the first year or two just to pressure the competition and build a reputation as the cheapest, then they ramp the price up once they have a sufficient chunk of the market. Businesses will also sell old stock at a loss simply to free up capital that's trapped in stockholding.

Re:Falling to near zero??

[jrroche]

With algorithmic pricing, the Amazon marketplace is just operating as an automated dutch auction. It's how markets should behave: raw supply and demand, with no collusion or other market distortions propping up prices.

Because everyone automatically undercutting their competitors by a few cents over and over until everyone is selling at cost and all but a couple players eventually have to shut down because they can't afford to run a profitless business forever, whereupon the few remaining players can finally raise prices ... isn't effectively collusion or a market distortion.

Re:Falling to near zero??

[L4t3r4lu5]

That's how true unregulated Free Market economies end, which is why they're a bad idea.

I've no idea if that's even true; It just makes sense that it would happen.

Re:Falling to near zero??

[Bob9113]

Because everyone automatically undercutting their competitors by a few cents over and over until everyone is selling at cost and all but a couple players eventually have to shut down because they can't afford to run a profitless business forever, whereupon the few remaining players can finally raise prices ... isn't effectively collusion or a market distortion.

Your comment is exactly correct, but I get the feeling you are trying to be snarky. You also fail to mention the next step after the remaining players raise prices: New competitors enter the market, undercut the would-be oligarchs, and the process starts all over again. The lower the barriers to entry (and with Amazon, they are very low (except that Amazon is the sole supplier (but I digress))), the lower the cost for the new competitors to jump in.

Eventually, equilibrium is reached at the point where the cost of entering the market plus the time value of the startup money is just covered by the profit over the average lifespan of a new entrant. It is a naturally self-regulating system that seeks the optimal market price of consumer goods and constantly adjusts for the changing time value of money. Pretty cool stuff, right?

Re:Falling to near zero??

[s73v3r]

New competitors enter the market, undercut the would-be oligarchs, and the process starts all over again.

Except this isn't guaranteed to happen. And should someone try it, the oligarchs are established players in the market, with access to far greater amounts of resources than the startup. Hell, most of the time one of the oligarchs just buys the startup.

Re:Falling to near zero??

[s73v3r]

The scenario you're describing is usually only common when there are HIGH BARRIERS TO ENTRY, which, more often than not, are CREATED BY GOVERNMENT REGULATION.

Horseshit. People who bitch about government regulation behing high barriers to entry are usually just whiny bitches who couldn't succeed in the first place. Government regulation is rarely among the most significant barriers to entry, unless you're talking about something extremely dangerous or destructive, like strip mining or nuclear power. The biggest barrier to entry is more often than not, startup capital required, and the presence of existing players who would be able to put their prices lower than yours and push you out of the market.

Re:Falling to near zero??

[dell623]

Even if the price of selling in the market is low, the price of production, especially the capital costs are often not low. And once players are driven out of the market, the capital costs need to be paid all over again for any new entrant. Which means that the monopoly or duopoly parties can temporarily cut prices to make it uneconomical for any new parties to enter the market. And so no new competitors enter the market.

So no, it's not a naturally self regulating ideal system. At least everyone stopped pretending any marxist/socialist system is 'ideal', somehow free marketeers can still get away with making that absolutist claim.

Re:Falling to near zero??

[thePowerOfGrayskull]

. The lower the barriers to entry (and with Amazon, they are very low (except that Amazon is the sole supplier (but I digress))), the lower the cost for the new competitors to jump in.

You skipped the part where - any time new competitors do jump in - the established businesses can afford to once again cut their prices until the new competitors can no longer compete.

Eventually, equilibrium is reached at the point where the cost of entering the market plus the time value of the startup money is just covered by the profit over the average lifespan of a new entrant. It is a naturally self-regulating system that seeks the optimal market price of consumer goods and constantly adjusts for the changing time value of money. Pretty cool stuff, rig

Assuming that everyone is acting in rational self-interest. Once you leave the "rational" part out - as the larger players inevitably do - then you have the situation above, where any new competitors are effectively locked out.

Re:Falling to near zero??

[0123456]

You skipped the part where - any time new competitors do jump in - the established businesses can afford to once again cut their prices until the new competitors can no longer compete.

And?

You seem to have missed the part where the 'established businesses' get to ever raise prices high enough to rake in a vast EVIL MONOPOLY profit without competitors coming along to under-cut them.

Because, absent government regulations to keep new competitors out of the market, they don't.

Re:Falling to near zero??

[bhlowe]

The gas station example is specifically not horseshit. The number of independent gas station owners dropped dramatically after a number of insane regulations that required $100K's of dollars of unnecessary retrofitting. Yes, big oil companies more easily afford larger regulatory expenses, but the regulations resulted in less competition and higher prices at the pump. But independent gas stations used to be the norm, now it is the exception... and oil companies and regulations make it difficult to compete--making it, for instance, illegal to purchase gasoline from another state, or requiring that a gas station owner buy gas from a particular refinery.

Re:Falling to near zero??

[mrlibertarian]

Even if the price of selling in the market is low, the price of production, especially the capital costs are often not low. And once players are driven out of the market, the capital costs need to be paid all over again for any new entrant. Which means that the monopoly or duopoly parties can temporarily cut prices to make it uneconomical for any new parties to enter the market. And so no new competitors enter the market.

At least, until the monopoly or duopoly raises prices and then it becomes economical again for new competitors to enter. And so, virtual competition regulates the market: The monopolist is forced to keep their prices low, lest they invite new competition.

Now, you might argue that's a bad thing, because a monopoly means there are few choices. But that assumes that more choice is always a good thing, no matter what it costs. The reality is that, every time you have multiple competitors in a market, you have duplication of resources. Thus, the fact that the market discourages competition, until it is actually needed, is a good thing, because it discourages the unnecessary duplication of resources that competition brings (i.e. the market puts up with a certain amount of crap from the monopolist, but eventually consumers get so fed up they actively seek out new competition).

Re:Falling to near zero??

[thesandtiger]

I might be wrong, but it seems to me like the only time a new competitor should try to enter an established market for a commodity product would be if that new competitor has some novel way to cut the costs of providing that product or they can add value that the established competitors cannot.

If they can lower the cost of providing the product sufficiently, they would thus be able to survive while the established players take losses that are unsustainable when dropping price. If they can put in an added value that is considered more valuable than the cost savings of buying from an established competitor, they should be able to survive, too.

Eventually the novel lower cost or value added approach would become the new equilibrium as the established players were forced out of the market or forced to adapt, IF the novel approach offered by a new entrant into the market really is valuable.

At least, that's how it seems like it should work?

In any case, it seems to me like an automated system to undercut should probably have multiple levels at which it requires confirmation to go further on something like Amazon, like a penny above the cost of providing the item, and then multiple points below that, or something would require a human to confirm a drop. I'm going to say that the need for speed probably isn't as great on Amazon as it is on the stock markets, so that need for a confirmation probably wouldn't be a make or break moment for a business.

Economics is obviously not my strong suit, so anyone who knows more about this stuff please, feel free to correct me - it's pretty fascinating really.

Re:Falling to near zero??

[Archangel Michael]

And people like you have no real idea how much government regulations cost business.

People like us are not complaining about regulations, we're complaining about regulations that do NOTHING to prevent or mitigate the problems they supposedly are addressing.

Take for instance, "Contractor License" requirement. There is nothing a contractor's license proves, yet it is required to do business in that field. It doesn't solve the "scam" artists, it doesn't prevent shoddy craftmenship. ALL it does is serve as barrier to entry into the field. PERIOD.

OR how about this. There is a fire hazard law that says you cannot daisy chain Extension cords. Okay so the solution is to buy a extension cord long enough. No problem. How about those Power strips? Well good luck finding one that has 25' cord on it. You have to make it yourself or get an electrician to do it. Well, I've seen more fires(Computer Power Supply pooof) due to faulty re-wire job on those than I have due to daisy chaining them together. IT does NOTHING to solve the problem, and actually creates new problems and ... if you're following along ... new regulations! Yay!

Re:Falling to near zero??

[JBHarris]

People who bitch about government regulation behing high barriers to entry are usually just whiny bitches who couldn't succeed in the first place.

This is not true in my experience. Often times people have been making a perfectly viable living doing a certain thing, and then excessive regulation pushes them out of the market so the big players can take over. Larger players are the ones with the lobbyists to help define the red tape, and the money/lawyers to spend on navigating it.

Go try to harvest oysters or clams in a Florida harvesting area. The startup capital is a bucket and some mud-boots. The regulatory hoops you much jump through to get that shellfish harvesting certificate are insane. The direct costs paid to the State are only a couple hundred dollars, but you have the cost of inspections (for the "washing facility", aka a sink), the cost of training, the cost of the government mandated tags that denote the area, condition, and purpose of the shellfish (different requirements for raw, on the half-shell oysters vs the ones for cooking vs ones for freezing vs ones for personal consumption), then the cost of yearly assessments. These costs can easily add up to dozens of thousands of dollars, and are considerably higher than the startup costs.

With all due respect, people that say things like that don't seem to have any experience doing something that is regulated, and therefore talk out of their ass.

Re:Falling to near zero??

[roman_mir]

Your comment is so stupid, it's beyond words.

It's not the ECONOMY that 'ends' in a free market when somebody stops making a profit, it's that specific business model that puts somebody out of business ends and the market actually LEARNS something from that mistake.

Now contrast with the government ran economies - the same stupid thing is done over and over and over, the money is printed, the inflation causes savings to be wiped out or moved out and asset bubbles form while productivity falls.

Then the recession hits, which is free market attempting to reset the problem by erasing the fake credit, the fake values of assets, restore interest rates so that savings can be made again.

Then the government steps in with more fake money and fake interest rates, trying to inflate another asset bubble and call it 'economic recovery'. This is done in a loop over and over until either the government gives up and economy restructures (fat chance) or the free market stops playing the game, nobody wants to trade for that destroyed currency and there is a real economic collapse, which forces the restructuring anyway.

This is exactly the same as what happens when people try to prevent small fires that happen in forests and clean up the underbrush and all the rotten and fallen wood. For a while people prevent small fires from burning through the woods, eventually there is so much fuel collected in the forest that a huge fire destroys the forest and everything around it.

Re:Falling to near zero??

[EvolutionInAction]

Riiight. I remember a small independent gas station owner in my home town. The guy had to have the entire lot ripped up, and the dirt shipped away to be decontaminated. I bet everybody living near there wished he had followed the gov't regs a little closer.

Re:Falling to near zero??

[roman_mir]

Wrong, you are wrong on the facts. USA had the freest market between its Civil war and WWI. That's when USA became largest producer, exporter, creditor nation, allowed most competition, which brought everybody's standard of living up, allowed people to innovate.

USA had almost no government at all at that time period, no income taxes, no departments, pretty much nothing, and economy actually turned to be first world economy, and only 100 years before USA was 3rd world.

But not only USA, China has allowed its people to be much freer economically speaking for the last 40 years and that's why it is the biggest growing economy.

In the old times it was the Roman empire that allowed free trade, that's what made it into a powerful nation.

The problem with wealthy states is that the government grows and eventually destroys the economy and society by promising free stuff to voters.

Re:Falling to near zero??

[roman_mir]

By the FINRA rules there has to be a COMPLAINT, I am talking about companies being shaken down, don't you understand? They invade the main office, they come by the dozen, go over every single paper and trail, they want to see all personal information of every client and every detail about every transaction.

Then they go to the satellite offices everywhere else, in other cities. FINRA chased so many businesses out of the market that their revenues fell so much, they had to raise fees by a factor, which will eventually cause more shut downs.

All this is done to SMALL firms. You think GS gets this type of treatment? JPM Chase? Ha!

The small firms are at a huge disadvantage and they don't get bailed out either, they live by the word of mouth, but they can't legally advertise. Every card in the deck is stacked against them, this is done so that the main few firms stay in business, getting bail outs and stimulus and so that there is no choice for clients but to put their money with those few large too big to fail firms.

And what do they do with that money? Loan it to the government or use it to gamble, they are not investing in sound money or sound businesses. It's a huge disaster and it's done with inflation, regulations and taxes.

Problem?

[Bigby]

And that is a problem, why? Just like in the flash crash, some people lost money and some people got big deals. If you don't want it to affect you, don't get involved. In both cases, it hurts the organizations and institutions more than an individual trader/buyer/seller.

Re:Problem?

[space_in_your_face]

From TFA: Jack Sheng of eForCity, which sells electronics on Amazon, warned of the dangerous impact algorithmic pricing could have on the retailer’s prices: “If something is mispriced down to $1, your inventory can be cleaned out in no time.”
I hope you put a minimum price on every item for which an algorithm decides the price. If so, I don't see the problem if someone "clean out your inventory". It means a lot of sales at a price you agreed...
OTOH, if you didn't put a minimum price, you just get what you deserve.

Re:Problem?

[darkwing_bmf]

This is the kind of problem that is solved with natural selection. The companies too stupid to put in a minimum price will go out of business and the remaining companies will be stronger.

Re:Problem?

[Errol backfiring]

Well, that depends how and when the prizes are determined. If you are browsing a page with article of, say, $2, and it costs $20 as you enter the shop, you're just mislead.

Apart from that, our economics are based on a stabilizing situation. If something is sold too cheap, it will be corrected in due time. If something is sold too expensive, that would be corrected also. In that equilibrium, consumer and producer would meet half-way their self-interest. So in the end, the price is "right".

High-speed trading is an unstabilizing situation, meant to just suck money out of a trade. From a consumer's point of view, the price is now always wrong. Nothing of value is bought with it, and the customers pay dearly for that nothing.

Re:Problem?

[gorzek]

There has to be a way to set a minimum price, otherwise this system is too dangerous for any seller to want to use.

Re:Problem?

[superid]

I'm sure some people got good deals in the flash crash but IIRC didn't the NYSE back out many of the trades saying that they were erroneous?

Re:Problem?

[Kjella]

Approximately 99.999% of all shops I know both online and offline have some sort of "typo clause" in their terms and conditions, if their $100 item is suddenly $1 for some reason I think most will choose to exercise it if the algorithm goes completely bonkers. But if it's a minor mispricing relative to the item value or their total sales and they don't want the flurry of 1-star reviews that's bound to follow, they eat that loss. Been there, done that, got my order fulfilled - let's call it a surprise sale for both parties. If you're fucking this up so badly you can't take it, you really got no business running a retail store.

Re:Problem?

[magarity]

And that is a problem, why? Just like in the flash crash, some people lost money and some people got big deals.

No, they don't. The sellers will notice the price dip and cancel all the sales with the excuse of it being a mistake.

Bring it on I say

[msgmonkey]

I'd like to see what happens when the sellers stop fulfilling orders. Plus how long before someone brings out a sniping tool for customers to purchase items when at the bottom of the curve?

Add an "it's not worth it" detector

[davidwr]

Each vendor needs to add "is it worth it to let others control our prices" logic to its auto-pricers.

Is it worth it to let a widget normally priced at $10 to drop to $5? to $1? to $0.01?

Except for deliberate loss leaders and other promotional items, you may want to set your short-term "floor" to be somewhere around your actual costs and your long-term "floor" to be a bit higher.

If a competitor undercuts you below where you are willing to let your program auto-price and he keeps it there, you may want human intervention.

So what?

[Lev13than]

As long as Amazon forces the sellers to honour the price, then I don't see a problem. Pure market forces will balance the risk/reward for dynamic prices - if one or two consumers get lucky, then that's the cost of doing business.

The biggest mistake that the exchanges made following the flash crash was to cancel the errant trades - if you fuck up the pricing, you need to deal with the consequences. Getting rid of downside risk removes half the equation and blocks any incentive to play smart.

Re:So what?

[gorzek]

Amazon processes the payments and it's all done as one transaction: you say "I want to buy this item," Amazon shows you what you will be charged, you complete the transaction, done. The seller would only be able to reverse it (such as if they are out of stock), not initiate a new one or change the price after the fact.

Re:So what?

[SirGarlon]

it charges you a higher amount for the same product because it assumes you have a higher willingness to pay

And if you do have a higher willingness to pay, then I don't see the problem.

Re:So what?

[rickb928]

That's almost funny.

If the seller finds that the price was driven below cost by the algorith, how much would you want to bet that they will simply declare the item 'out of stock', and refuse to sell to you?

Groupon has been through an analog of this repeatedly, where someone will offer services for a discount, and get flooded with redemptions such that they cannot afford to do several years' work for nearly nothing. All the examples I'm aware of resulted in the offerer negotiating with their customers and resolving the problem, but Groupon at one time was deaf to the complaints that they should have counseled the merchant better. Probably correct, but not very helpful.

I'm betting reversals will happen, and Amazon will be selective in their punishment of vendors. Net result, mistrust and reduced confidence.

Re:So what?

[tlhIngan]

The real fun will happen when it algorithmically displays higher or lower prices on a per-user basis based on your purchase history; e.g. if you generally buy premium products, it charges you a higher amount for the same product because it assumes you have a higher willingness to pay.

That's called dynamic pricing, and Amazon did it at one point.

Of course, the problem with dynamic pricing is it relies on the ignorance of the user. As discovered in that article, if you use a different browser or not logged on, it would display a different price than when you went to check out.

And with the proliferation of smartphones and tablets, it's possible someone might browse Amazon and buy on their PC, and realize the price is different. You'd basically need to give everyone a personal ID code to ensure whatever screen they look at shows their own price. Which breaks the moment someone else looks up the item and gets a different price.

Dynamic pricing only works when the user is treated in aggregate (e.g., a vending machine that alters prices based on outside temperature but everyone pays the same), or the user cannot inform themselves of alternative pricing.

It should also be differentiated from preferential sorting - where a person who buys premium products will do a search and be shown the premium products first, then the cheaper ones down the line. Done right, preferential sorting can make a search engine seem "good" at finding stuff the person wants without having to wade through listings of cheaper stuff they don't want.

Re:So what?

[timeOday]

I like to accumulate things in my Amazon "shopping cart" sometimes over a period of weeks until I have enough for free shipping, or finally decide whether I really want something. But I have found this increasingly nonproductive as prices jump all over the place constantly. Most of what I put in my basket is "no longer available from seller" or the price goes up a little a few days later.

I'm not saying I've being cheated, but I'm enjoying Amazon less as it's becoming less of a storefront and more of a bazaar-type experience, with wildly varying shipping costs and return policies from item to item. I might as well go on ebay, or else a more conventional storefront like newegg if I don't want the hassle.

Re:So what?

[CowTipperGore]

I'm the same way. Every time I log into Amazon now I have a whole page of "This item's price has changed" notices. But I can deal with that versus some of the other changes I've noticed recently.

Amazon apparently changed the algorithm for deciding which item gets returned when you search for something that has multiple listings. If I search for some SD cards, the one returned is never the cheapest and often isn't even the real Amazon listing but some random storefront. And where I used to find that Amazon sold it, now there are 40 storefronts that sell it but Amazon doesn't. So there are fewer and fewer items qualifying for free shipping. And those that use Amazon for order fulfillment set their prices to be one cent less than the cheapest competitor plus their shipping costs. So you no longer save by using a store that fulfills via Amazon.

There's also a huge number of items listed on Amazon stores that are insanely expensive. For example, I needed new filters for my pool pump. They were listed by several stores on Amazon, all at an extremely high price. The manufacturer sells the filter for about 1/3 of the cost directly from their web site.

Like the OP, I've used eBay more and more recently because Amazon is turning into a cesspool.

So what?

[SirGarlon]

Who, other than the retailers, care if there is a "flash crash?" Presumably if they lose enough money on flash crashes they will stop with the algorithmic pricing.

Likewise, if I find algorithmic pricing makes prices unattractively high, I'll shop somewhere else. There has to be someone out there selling a product similar to what I want, without the algorithmic gouging.

In short, I think this is one case where we can trust the market to operate correctly.

Not gonna happen

[LittleImp]

If you think about this for 1min, you will realize that all the sellers have to buy the stuff themselves from somewhere. Obviously they will put in a limit so the price will never go so low that they would make a net loss. An since the buy-prices are not depending on the amazon-sell-prices, no such "flash crash" could possibly ever happen. Of course I do not expect some journalist to think for 1min before writing an article.

It sounds like a good deal for the customer

[circletimessquare]

But if I buy a paperback copy of "Fifty Shades of Grey" for only $0.10 due to a flash crash in autogenerated stock prices, I metaphysically lose, society loses, civilization loses. The seller still wins, Mephistopheles wins, evil triumphs.

Re:Big difference.

[Anonymous Coward]

Go read an Austrian economics book. Speculation is useful and voluntary. It's nothing at all like gambling unless you think betting on red changes the odds that red will come up in an honest casino.

Won't happen. Here's why:

[Qbertino]

A little history:
I was the first to automate price wars on amazon marketplace. (True thing.)

A friend had just joined marketplace with a freshly founded internet media sales joint after it opened and two weeks in was adjusting prices of his sale books manually. Like, seriously, clicking through 200 items a night and entering new prices. I told him to stop that nonsense and built an automated scraper, parser and some other tools in Python that would parse the actual websites for each of our articles ISBN and compare our prices to those of the competition (this was before the days of publicly available Amazon APIs), readjust our pricing to the cent accordingly and upload the freshly generated updates once all 200 000 items were parsed.

Orders went from 3 - 5 per day to 120 - 150 per day. My buddies were packaging books and CDs all day while I was sitting there grinning and petting my script and ama-bot setup (still those right here in my project folder :-) ). We made 700 000$ of revenue the first year. A few months in competitors started to do the same - no suprise, the concept is quite obvious to any computer or programming guy - and a ruinous price-war started. My friend went out of business a year later. We could have fine-tuned the automated price adjustments like the marketplace vendors are doing today, such as upping the price of an item only you have got in stock, but after a few bad business decisions my friend didn't want to continue. That was all back in the early 2000s (2003-2004ish).

On the issue discussed:
Before a Flash Crash can happen on sites like amazon marketplace, the vendors involved will either die a painfull death before or finetune their algorythims to a much more complex model. Those still alive and well today have done the latter, and even if updates occur every 15 minutes, I'd bet money that they are still watching the sales and revenue with the appropriate tools and with their own eyeballs, because you can lose thousands within minutes if you don't. You can automate a lot, but you can't automate day-to-day business decisions, especially in such markets.

Bottom line:
Crashes don't happen here, only individual foreclosures for those who don't watch out well enough.

My 2 cents. .... Aaaah, the memories ...

Re:Big difference.

[Quiet_Desperation]

Another fine lesson in Slashdot Economic Theory brought to you by the letter G and the number zero.

Re:Big difference.

[Anonymous Coward]

It's also popular with Nobel Prize winners.

Re:Big difference.

[lightknight]

In general, Austrians take only one axiom (that humans act in attempts to better their lives), while other schools of economics take several.

Additionally, Austrians recognize the inability to run full-detailed simulations of the economy which give reliable results (The Calculation Problem). I feel if I elaborate any more on the matter, I will do injustice to the Austrian school (I am rude of tongue).

If you would like to learn more about the Calculation Problem with regards to Mises and his explanation of it, I'd recommend reading about it here. I will affix a warning to my previous sentence, that if you are of a delicate political or economic nature, such that you cringe, despair, or evince a developed opinion with regards to the usage of words like 'Socialism', as most Americans are either for or against, you may pass over, or otherwise read the linked text with colored vision; if you are the kind of person is easily inflamed or are prone to confirmation bias, you may save yourself some time and emotional distress by avoiding the reading of the linked text.

110,000 Independent Gas Stations

[westlake]

The gas station example is specifically not horseshit. The number of independent gas station owners dropped dramatically after a number of insane regulations that required $100K's of dollars of unnecessary retrofitting.

From the WSJ:

Until the past five years or so, many gas stations were owned by the big energy companies. But most have since sold off their portfolio of stations to focus on more profitable areas, such as wholesale fuel sales.

Since 2008, for instance, Exxon Mobil Corp has sold more than 95% of the roughly 2,000 stations it owned, and it plans to sell the rest by year-end. Chevron Corp had 491 company-owned stations at the end of 2011, down from 1,348 in 2001.

Most U.S. gas stations are owned by tens of thousands of individual operators, many of whom have one or more locations. These independent station owners typically buy their fuel from distributors for the major fuel wholesalers like Exxon Mobil and Chevron. The regional distributors own or hire tanker trucks that go from the so-called racks at gasoline terminals to storage tanks at the individual stations.

The station owners, in turn, set their gas prices for consumers so that the average markup, or gross margin, on gas is typically around 15 cents or 16 cents a gallon.

Because consumers these days use plastic even for spontaneous small purchases such as gas, snacks and smokes, the station owners say their margins are eroding.

Frank Reluzco, owner of an Exxon station, auto-repair business and convenience store in Frederick, Md., said that roughly 90% of his sales are paid by credit card today, compared with about 75% five years ago. "It costs so much to fill a tank right now; no one's going to carry around that much cash."

Increased competition from supermarkets and warehouse clubs is also a challenge. Issaquah, Wash.-based Costco Wholesale Corp added its first gas pumps alongside one of its stores in Tucson, Ariz., in 1995.

Pain at Pump Is Hitting Gas Stations [April 5]