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

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

Austrian Institute of Economic Research (WIFO) ( email )

Arsenal Objekt 20
Wien, 1030
Austria
+43-1-7982601-471 (Phone)

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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