HSM 450
University of Rochester/The Simon Business School
Managerial Economics and Organizational Architecture
Seventh Edition
Publisher: McGraw Hill
By James A. Brickey/Clifford W. Smith/Jerold L. Zimmerman
Chapter 2 Economists View of Behavior
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. Please 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).
