Competition in Retail Gasoline Markets
Mariano E. Tappata
University of British Columbia - Sauder School of Business, Strategy and Business Economics Division
University of British Columbia (UBC) - Sauder School of Business
July 30, 2013
We study the relationship between prices and market structure in geographically isolated markets that are exposed to large demand shocks. The temporal variation in market size allows us to overcome the classical endogeneity bias in standard concentration-performance regressions. We find evidence of local market power in gasoline markets due to product differentiation. Additionally, the high margins that characterize concentrated markets dissipates quickly with the number of competitors. Ignoring market structure endogeneity leads to underestimating the effect of market concentration on prices between 55 and 70 percent.
Number of Pages in PDF File: 23
Keywords: gasoline retailing, competition, concentration-performance studies
JEL Classification: L11, L13, L52, L90
Date posted: August 14, 2013
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