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0 pointstwoodfin2y ago0 comments

Gasoline isn’t a digression, it’s a great example of why removing precision from prices is a bad idea.

Imagine you own a gas station. Your actual cost to fill your tanks is some multiple of the price you can charge per gallon. Requiring 10 cent-rounded prices kneecaps your ability to efficiently price your product.

Flipping it around, if you think $1/10 increments are good enough for a gas station owner, why aren’t they good enough for Microsoft when its shares are traded? Decimalization in equity markets has been widely seen as a success because more precise prices communicate information about the relative interests of buyers and sellers more accurately.

Given the predominance of digital transactions, it’s hard to argue that the transactional efficiency gains of less precise prices are worth the downsides.

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nucleardog2y ago

> Imagine you own a gas station. Your actual cost to fill your tanks is some multiple of the price you can charge per gallon. Requiring 10 cent-rounded prices kneecaps your ability to efficiently price your product.

This is… already the situation?

Most gas stations where I am are pricing their product in thousands of a cent and rounding the total off to the nearest cent when it’s time to pay.

We got rid of the penny a decade ago in Canada. It just means that for cash transactions the gas station rounds off to the nearest five cents instead. The most they can “lose” is two cents _on the total transaction_. Hardly seems different than losing several tenths of a cent on some transactions (as they already were) in aggregate.

bigger_inside2y ago

also strangely missing from this discussion about the supposed outrages of pricing when you round, and losing 0.1 or 0.2% in cash payments, is that credit card companies will charge that gas station is a bit over 2%. So no matter what coin you abolish, the gas station comes out on top on the cash payment, even if it's the quarter. It'd still come out on top if it was the dollar bill/coin for bills under $200, so, pretty much always.

zamadatix2y ago

It's more "already handled" than missing. Gas stations already often advertise a cash price and paying by credit gives you a higher price which includes the markup. It's perhaps the most commonly used type of business that bothers to do this because the margins are so thin.

juped2y ago

Gas stations denominate in thousandths of a dollar, for which there is no coinage.

cduzz2y ago

Well, my statement was for _cash_ transactions, and why I mentioned arbitrage.

We could as easily add a 1/1000th unit to the dollar, and mandate that for cash transactions round to the 1/10th but for credit and other electronic transactions they'd be to the "iota" or some other charming term for the millidollar. I'm pretty sure that aeons ago there were half pennies, so it isn't completely absurd.

Also, I'm pretty sure that in the not so distant past stocks used some weird fraction of dollars not decimals[1].

[1] https://www.investopedia.com/ask/answers/why-nyse-switch-fra...

[edited to add example of fractionally denominated stock prices]

[edit2: ah, sorry you mentioned the fractional stock issue with the observation "precise values are good" which they are. I still retain my position that, for retail cash based commerce, precise values are less valuable than the time invested in the transaction. ]

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