Understanding Gasoline Price Dispersion

Demet Yilmazkuday

Florida International University

Hakan Yilmazkuday

Florida International University

August 24, 2012

This paper models and estimates the gasoline price dispersion across time and space by introducing and using a unique gasoline price data set at the gas-station level within the U.S. Nationwide effects (measured by time fixed effects or crude oil prices) explain up to about 51% of the gasoline price dispersion followed by the contributions of refinery-specific costs up to about 33%, state taxes about 12%, markups through Bertrand competition about 10%, and spatial factors (such as local agglomeration externalities, land prices, distribution costs of gasoline) up to about 4%. The contribution of brand-specific factors are relatively minor. A welfare analysis further suggests that the elasticities of individual welfare with respect to gasoline prices vary significantly across space, indicating redistributive welfare effects of spatially distributed gasoline prices.

Number of Pages in PDF File: 43

Keywords: Gasoline Prices, Gas-Station Level Analysis, Nighttime Lights, Land Prices, the United States

JEL Classification: L11, L81, R32, R41

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Date posted: April 4, 2012 ; Last revised: August 27, 2012

Suggested Citation

Yilmazkuday, Demet and Yilmazkuday, Hakan, Understanding Gasoline Price Dispersion (August 24, 2012). Available at SSRN: http://ssrn.com/abstract=2034478 or http://dx.doi.org/10.2139/ssrn.2034478

Contact Information

Demet Yilmazkuday
Florida International University ( email )
Miami, FL 33199
United States
Hakan Yilmazkuday (Contact Author)
Florida International University ( email )
Miami, FL 33199
United States
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