Spatial Price Competition: A Semiparametric Approach

Posted: 17 Sep 2002

See all articles by Joris Pinkse

Joris Pinkse

Pennsylvania State University, College of the Liberal Arts - Department of Economic

Margaret E. Slade

University of Warwick - Department of Economics

Craig Brett

Mount Allison University - Department of Mathematics and Computer Science

Abstract

We investigate the nature of price competition among firms that produce differentiated products and compete in markets that are limited in extent. We propose an instrumental variables series estimator for the matrix of cross price response coefficients, demonstrate that our estimator is consistent, and derive its asymptotic distribution. Our semiparametric approach allows us to discriminate among models of global competition, in which all products compete with all others, and local competition, in which products compete only with their neighbors. We apply our semiparametric estimator to data from U.S. wholesale gasoline markets and find that, in this market, competition is highly localized.

Suggested Citation

Pinkse, Joris and Slade, Margaret E. and Brett, Craig, Spatial Price Competition: A Semiparametric Approach. Available at SSRN: https://ssrn.com/abstract=312468

Joris Pinkse (Contact Author)

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

608 Kern Graduate Building
University Park, PA 16802-3306
United States
814-863-0508 (Phone)
814-863-4775 (Fax)

Margaret E. Slade

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Craig Brett

Mount Allison University - Department of Mathematics and Computer Science ( email )

67 York Street
Sackville NB E4L 1E6
Canada

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