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Water & Gas: An American pricing paradox

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Indeed, product loyalty among bottled-water drinkers is very high. About 65 percent have a brand preference. In contrast, "nobody knows what gasoline they put in their car," says Kaminsky. "Gas is gas."

Gasoline's generic appeal

Consumers' allegiance to specific brands of gasoline began to fade during the mid-1970s, when retailers started cutting services in the wake of the nation's energy crisis.

Over time, gasoline vendors struggled to persuade consumers that their brand was any better than – or different from – other retailers' brands.

The upshot: Gasoline retailers can rarely get away with charging high prices.

Regardless of the downshift in service, the market for gasoline was likely to evolve toward flat pricing, experts say. Consumers become savvier about products over time. Gasoline, which Americans have consistently bought for more than a half century, is no different.

New products have the opposite effect. As the market for a new product emerges, people have little knowledge of the relative quality of one brand compared with another. When in doubt, they tend to equate quality with price.

"If consumers have no other way to determine differences in a product, they rely on price for a signal of quality," says Gerry Smith, a marketing professor at Boston College.

Water bottlers are currently reaping the benefits. Because bottled-water drinkers are more sensitive to quality and more affluent than most consumers, they are less likely to flinch at high prices, experts say.

Taxing petrol

Consumers grouse when overall gasoline prices rise. But they have had little reason to complain in the long term. Adjusted for inflation, a gallon of gasoline cost an average of $1.55 in 1949.

Gasoline sold in the US costs about the same to extract and process as gasoline sold around the world. Because of lower taxes, Americans continue to pay far less.

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