I measure price dispersion among differentiated retail gasoline sellers and study the relationship between dispersion and the local competitive environment. Significant price dispersion exists even after controlling for differences in station characteristics, and price differences between sellers change frequently. The extent of price dispersion is related to the density of local competition, but this relationship varies significantly depending on the type of seller and the composition of its competitors. These findings are consistent with interactions between seller and consumer heterogeneity that are not well understood in the existing price dispersion literature. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.
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