Hmmm. I'm not sure I see that happen very often in the world. I think your example is the rare one.
It's happening all around us, all the time.
A good example is (if you're old enough to remember) when women entered the job market in a big way back in the late 60s. And suddenly there were an ever increasing number of 2-income households. The prices of homes and cars and luxury items all shot up, and most other markets soon followed. Because there was more money available for consumers to spend. Now most households NEED two incomes just to survive. And those prices did not go up because costs of production went up. And they didn't go up because the production values suddenly increased. They went up
because they could. And it's been this way since the middle of the last century when most people became fundamentally dependent on the markets for their survival. Creating
captive markets that are, in essence, natural monopolies.
I've used this story before to illustrate.
There are two gas stations in a small town. And they are far enough apart that they each have their own clientele. And they each buy their gas from the same supplier, so they pay the same amount for their product, and therefor they charge the same amount to their customers. The mark-up is not huge, and neither of them wants to cut their profits by dropping the price to try and gain the other guy's customers. All that would get them is more work, (more sales, but with a higher cost for supply) but not more profit. So neither is interested in a price war.
But one day it occurs to one of the station owners that if he were to raise his gas price by 1 cent a gallon, he would not lose any customers. Because the customers would use up their potential savings in going to the other station, in the extra gas required to drive there and back. So he does it. He raises his gas price by a penny. And he was right; his customers pay the extra penny rather than drive across town to the other station.
Now, the other station owner sees this, and it occurs to him that he could raise his price per gallon by 2 cents, and still retain all his customers for the very same reason. They will not drive across town and back just to save 1 cent on gas, because they'll use up the savings in the gas expended to do it. So this station owner raises his price by 2 cents a gallon, and now has increased his profits by twice that of the other station's increase. And, of course, the first station owner then realizes that he can do the same thing in return, for the same reasons, so he increases his price, again, by 2 cents this time.
And on and on this will go, until the price for gas at both stations reaches the point where it's cheaper for the customers to drive to the next town over to buy gas. And both stations begin to lose sales. At which point the same increasing price dynamic will begin again, only this time between the stations in the two towns. And the only limitation to this price increase will be that their customers will simply stop driving, or drive as little as possible, because they can no longer afford to buy the gasoline.
You say you don't see this happen, and yet it's happening all around you all the time. And not just with gasoline, but with any product that the sellers all know the buyers must buy. Because when the buyers must buy, the only limitation to the price-gouging is the buyer running out of money.