This does sound a little bit like the complaint that people spend 25% of the price of something (rather than of the time) on a car trip to save 5% on the price, but I’ve argued that that’s a form of precommitting where as long as you precommit to buy at the store with the lowest price even if it’s far away, nearby stores have an incentive to keep prices low.
But if you take into account both price and location when deciding where to shop, stores will have an incentive not only to keep prices low but also to be near where people are!
Stores can’t move closer to where all the people are, however; at some point any incentives from moving close to some people would be countered by moving away from other people. There’s also the problem that past a certain density stores do better when farther away from other stores. Not to mention the transaction costs moving in the first place. Prices don’t have these problems.
But if you take into account both price and location when deciding where to shop, stores will have an incentive not only to keep prices low but also to be near where people are!
Stores can’t move closer to where all the people are, however; at some point any incentives from moving close to some people would be countered by moving away from other people. There’s also the problem that past a certain density stores do better when farther away from other stores. Not to mention the transaction costs moving in the first place. Prices don’t have these problems.
All I’m saying is it looks like many people are being Rational because it’s fun, not because it’s useful.