Centrality and Pricing in Spatially Differentiated Markets: The Case of Gasoline

31 Pages Posted: 28 Jun 2017

See all articles by Matthias Firgo

Matthias Firgo

Munich University of Applied Sciences; Austrian Institute of Economic Research (WIFO)

Dieter Pennerstorfer

Austrian Institute of Economic Research (WIFO)

Christoph Weiss

Vienna University of Economics and Business - Department of Economics

Date Written: 2015

Abstract

We highlight the importance of ‘centrality’ for pricing. Firms characterized by a more central position in a spatial network are more powerful in terms of having a stronger impact on their competitors' prices and on equilibrium prices. These propositions are derived froma simple theoretical model and investigated empirically for the retail gasoline market of Vienna, Austria.We compute a measure of network centrality based on the locations of gasoline stations in the road network. Results from a spatial autoregressive model show that prices of gasoline stations are more strongly correlated with prices of central competitors.

Keywords: Network centrality, Spatial differentiation, Gasoline prices

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

Suggested Citation

Firgo, Matthias and Pennerstorfer, Dieter and Weiss, Christoph, Centrality and Pricing in Spatially Differentiated Markets: The Case of Gasoline (2015). International Journal of Industrial Organization, Vol. 40, No. 5, 2015, Available at SSRN: https://ssrn.com/abstract=2993150

Matthias Firgo

Munich University of Applied Sciences ( email )

Munich
Germany

Austrian Institute of Economic Research (WIFO)

Vienna
Austria

Dieter Pennerstorfer (Contact Author)

Austrian Institute of Economic Research (WIFO) ( email )

Christoph Weiss

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien
Austria

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