Centrality and Pricing in Spatially Differentiated Markets: The Case of Gasoline
31 Pages Posted: 28 Jun 2017
Date Written: 2015
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
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