Spatial Differentiation and Vertical Contracts in Retail Markets for Gasoline
48 Pages Posted: 10 Jun 2009
Date Written: June 3, 2009
This paper studies an empirical model of spatial competition and evaluates the impact of vertical relations on prices and consumer welfare. The main feature of my approach is to specify commuting paths as the "locations" of consumers in a Hotelling-style model. As a result spatial diﬀerentation depends in an intuitive way on the structure of the road network and the direction of traﬃc ﬂows. The model is estimated using panel data on the Québec City gasoline market, and used to quantify markups and simulate two important counter-factual policies: elimination of vertical integration, and wholesale price discrimination ban.
Keywords: Spatial diﬀerentiation, Gasoline, Retail markets, Vertical Contract, Market power
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