Price Strategies of Independent and Branded Dealers in Retail Gas Market. The Case of a Contract Reform in Spain

26 Pages Posted: 22 Jun 2018

See all articles by Pilar Cuadrado

Pilar Cuadrado

Banco de España

Aitor Lacuesta

Banco de España

María de los Llanos Matea

Banco de España

F. Javier Palencia-González

Universidad Nacional de Educacion a Distancia (UNED)

Date Written: June 22, 2018

Abstract

This paper analyses how the contract structure between gas stations and the wholesale operator affects price strategies. Using daily data on prices of different gas stations the paper finds that independent dealers charge lower margins than other dealers with different contracts. One potential hypothesis is that this is the case because independent stations react more to the number of competitors. We use the introduction of a discretional regional excise duty (IVMDH) on gas stations to check the reaction of markups to changes in marginal costs of the actual number of competitors. Results are consistent with the idea that regardless the type of contract all dealers react notably to the increases in relative marginal costs by decreasing average markups. We use those results to interpret the inexistent reduction in markups that followed a change in the Spanish regulation that took place in 2013 fostering competition in the retail sector. One potential interpretation is that the big increase in independent stations following the reform was not considered an increase in actual competition for most of the incumbent stations.

Keywords: competition, oligopoly, pass-through, gasoline, excise duty

JEL Classification: D40, H22, H23, L13, Q41

Suggested Citation

Cuadrado, Pilar and Lacuesta, Aitor and Matea, María de los Llanos and Palencia-González, F. Javier, Price Strategies of Independent and Branded Dealers in Retail Gas Market. The Case of a Contract Reform in Spain (June 22, 2018). Banco de Espana Working Paper No. 1818. Available at SSRN: https://ssrn.com/abstract=3200958 or http://dx.doi.org/10.2139/ssrn.3200958

Pilar Cuadrado (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

HOME PAGE: http://www.bde.es

Aitor Lacuesta

Banco de España ( email )

Madrid 28014
Spain

María de los Llanos Matea

Banco de España ( email )

Alcalá, 48
Madrid, Madrid 28014
Spain
+34 91-338-50-00 (Phone)

HOME PAGE: http://www.bde.es/

F. Javier Palencia-González

Universidad Nacional de Educacion a Distancia (UNED) ( email )

Calle Bravo Murillo, 38
Madrid 28006, Madrid 28040
Spain

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
31
Abstract Views
235
PlumX Metrics