Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?

35 Pages Posted: 20 Apr 2018

See all articles by Mai Nguyen

Mai Nguyen

Norwegian School of Economics (NHH) - Department of Business and Management Science

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: April 19, 2018

Abstract

Applying detailed consecutive daily micro data at the gasoline station level from Sweden we estimate a structural model to uncover the degree of competition in the gasoline retail market. We find that retailers do exercise market power, but despite the high upstream concentration, the market power is very limited on the downstream level. The degree of market power varies with both the distance to the nearest station and the local density of gasoline stations. A higher level of service tends to raise a seller’s market power; self-service stations have close to no market power. Contractual form and brand identity also seem to matter. We find a clear result: local station characteristics significantly affect the degree of market power. Our results indicate that local differences in station characteristics can more than offset the average market power found for the whole market.

Keywords: Gasoline markets, market power, markup estimation, local market competition

JEL Classification: D22, L13, L25, L81

Suggested Citation

Nguyen, Mai and Steen, Frode, Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon? (April 19, 2018). NHH Dept. of Business and Management Science Discussion Paper No. 2018/4. Available at SSRN: https://ssrn.com/abstract=3165384 or http://dx.doi.org/10.2139/ssrn.3165384

Mai Nguyen (Contact Author)

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 55 959 259 (Phone)
+47 55 959 543 (Fax)

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