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What graph can be used to explain this behavior and why do gas stations behave this way?

you have noticed that several gas stations are often found next

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you have noticed that several gas stations are often found next

Question
  • I am sure you have noticed that several gas stations are often found next to or very close to each other at highway intersections. They also often have same or similar prices. If one gas station tries to increase its price from the prevailing $2.89 to $3.09, customers will go across the street and the gas station will lose revenues. If the same gas station lowers is price to $2.69, it will attract new customers only until the other also drop their prices. What graph can be used to explain this behavior and why do gas stations behave this way?

you have noticed that several gas stations are often found next

 

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