Do the Poor Pay Disproportionately More for Increasing Market Concentration? A Study of Retail Petroleum Markets

47 Pages Posted: 8 Jul 2021 Last revised: 23 Mar 2022

See all articles by Farasat A. S. Bokhari

Farasat A. S. Bokhari

University of East Anglia (UEA) - School of Economic and Social Studies; University of East Anglia (UEA) - Centre for Competition Policy

Sean F. Ennis

Centre for Competition Policy, University of East Anglia; Norwich Business School, University of East Anglia

Franco Mariuzzo

University of East Anglia (UEA) - Centre for Competition Policy

Peter L. Ormosi

Norwich Business School; University of East Anglia (UEA) - Centre for Competition Policy; Compass Lexecon

Date Written: June 30, 2021

Abstract

A central tenet of industrial organisation is that increasing/decreasing market concentration is associated with increased/reduced markups. But do these variations affect every consumer to the same extent? Previous literature finds price dispersion exists even for homogeneous goods, at least partially as a result of heterogeneity in consumer engagement with the market. We link this heterogeneity to the impact of changing market concentration on markups. With 18 years of station-level motor fuel price data from Western Australia and information on instances of local market exit and entry, we apply a non-parametric causal forest approach to explore the heterogeneity in the effect of exit/entry. The paper provides evidence of the distributional effect of changing market concentration. Areas with lower income experience a larger increase in petrol stations' price margin as a result of market exit. On the other hand, entry does not benefit the same low-income areas with a larger reduction in the margin than in high-income areas. Policy implications include further focus on increasing engagement by low income consumers.

Keywords: inequality, market concentration, income, consumer search, causal forests

JEL Classification: L11, L40, L81, C14

Suggested Citation

Bokhari, Farasat A. S. and Ennis, Sean F. and Mariuzzo, Franco and Ormosi, Peter L. and Ormosi, Peter L., Do the Poor Pay Disproportionately More for Increasing Market Concentration? A Study of Retail Petroleum Markets (June 30, 2021). Available at SSRN: https://ssrn.com/abstract=3877256 or http://dx.doi.org/10.2139/ssrn.3877256

Farasat A. S. Bokhari

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

University of East Anglia (UEA) - Centre for Competition Policy ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

Sean F. Ennis

Centre for Competition Policy, University of East Anglia ( email )

United Kingdom
+44 (0)1603 591622 (Phone)

HOME PAGE: http://www.competitionpolicy.ac.uk

Norwich Business School, University of East Anglia ( email )

Norwich
NR4 7TJ
United Kingdom
+44 (0)1603 591622 (Phone)

Franco Mariuzzo

University of East Anglia (UEA) - Centre for Competition Policy ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

Peter L. Ormosi (Contact Author)

Norwich Business School ( email )

Norwich
NR4 7TJ
United Kingdom

University of East Anglia (UEA) - Centre for Competition Policy ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

Compass Lexecon ( email )

United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
155
Abstract Views
927
Rank
343,436
PlumX Metrics