Discounts For Cash In Retail Gasoline Marketing
Before introducing cash discounting in retail gasoline markets, major oil companies offered proprietary credit cards as an unpriced service to their customers. This paper analyzes the origins of cash discounting in order to determine why oil companies introduced explicit pricing of the credit service in 1982 only to begin discouraging it by the end of the decade. Sharp increases in nominal interest rates and in the real price of gasoline between 1978-1982 spurred a rapid rise in the cost of financing accounts receivable. This increasing cost in part drove the initial decision to discount. By 1990 the discounting trend reversed as the costs of processing credit transactions and of the float associated with non-revolving accounts receivable fell. Copyright 1992 Western Economic Association International.
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Volume (Year): 10 (1992)
Issue (Month): 4 (October)
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