Competition in Retail Gasoline Markets

23 Pages Posted: 14 Aug 2013  

Mariano E. Tappata

University of British Columbia - Sauder School of Business, Strategy and Business Economics Division

Jing Yan

University of British Columbia (UBC) - Sauder School of Business

Date Written: July 30, 2013

Abstract

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.

Keywords: gasoline retailing, competition, concentration-performance studies

JEL Classification: L11, L13, L52, L90

Suggested Citation

Tappata, Mariano E. and Yan, Jing, Competition in Retail Gasoline Markets (July 30, 2013). Available at SSRN: https://ssrn.com/abstract=2309595 or http://dx.doi.org/10.2139/ssrn.2309595

Mariano E. Tappata (Contact Author)

University of British Columbia - Sauder School of Business, Strategy and Business Economics Division ( email )

2053 Main Mall
Vancouver B.C., BC V6T-1Z2
Canada
1 (604) 822 8355 (Phone)

Jing Yan

University of British Columbia (UBC) - Sauder School of Business ( email )

Canada

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