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The Competitive Impact of Hypermarket Retailers on Gasoline Prices

Posted: 28 Jan 2010  

Paul R. Zimmerman

U.S. Federal Trade Commission - Bureau of Economics

Date Written: January 26, 2010

Abstract

Hypermarkets are large retail suppliers of general merchandise or grocery items that also sell gasoline, often at very low margins. Using panel data for 1998-2002, this paper estimates the impact of hypermarkets on average state-level retail gasoline prices. The empirical results suggest a robust, economically (and statistically) significant effect of increased competition from hypermarkets. Furthermore, the results also suggest that refiners’ lower the delivered wholesale prices charged to their affiliated lessee-dealer and open-dealer stations in response to increased hypermarket competition, which in turn translates to lower retail (street) prices. The presence of a state motor fuel sales-below-cost (SBC) law may lessen the price-reducing effects from hypermarket competition by 40-67 percent while independently imparting no other offsetting price reductions. Finally, using recently published estimates of the short-run own price elasticity of demand for gasoline, consumer welfare is estimated to have increased in the neighborhood of $488 million over the sample period.

Keywords: Dealer tank wagon, Hypermarkets, Motor fuel SBC laws, Petroleum, Vertical integration

JEL Classification: L11, L22, L71, Q40

Suggested Citation

Zimmerman, Paul R., The Competitive Impact of Hypermarket Retailers on Gasoline Prices (January 26, 2010). Available at SSRN: https://ssrn.com/abstract=1542692

Paul R. Zimmerman (Contact Author)

U.S. Federal Trade Commission - Bureau of Economics ( email )

601 New Jersey Ave. NW
Rm. 8103
Washington, DC 20580
United States

HOME PAGE: http://paul.r.zimmerman.googlepages.com/

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