Network Centrality and Market Prices. An Empirical Note

Abstract

We empirically investigate the importance of centrality (holding a central position in a spatial network) for strategic interaction in pricing for the Austrian retail gasoline market. Results from spatial autoregressive models suggest that the gasoline station located most closely to the market center – defined as the 1-median location – exerts the strongest effect on pricing decisions of other stations. We conclude that centrality influences firms' pricing behavior and further find that the importance of centrality increases with market size.

Keywords: network centrality, spatial competition, retail markets, gasoline prices

JEL Classification: C21, D43, L11, L81, R12