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Market Concentration and Product Variety under Spatial Competition: Evidence from Retail Gasoline

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Author Info

  • Georg Götz

    ()

  • Klaus Gugler

    ()

Abstract

We show that for a spatially differentiated economy reduced product variety is the likely outcome of mergers except in cases where exit costs in relation to (outlet specific) fixed costs are high. Our empirical analysis of the Austrian retail gasoline market confirms that increases in concentration reduce product variety. Ignoring this product variety effect is likely to lead to an underestimate of market power in structural merger analysis. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s10842-006-0025-z
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Bibliographic Info

Article provided by Springer in its journal Journal of Industry, Competition and Trade.

Volume (Year): 6 (2006)
Issue (Month): 3 (December)
Pages: 225-234

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Handle: RePEc:kap:jincot:v:6:y:2006:i:3:p:225-234

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Web page: http://springerlink.metapress.com/link.asp?id=105724

Related research

Keywords: spatial product differentiation; retail gasoline; mergers; concentration; L11; L13; L90;

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References

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  1. Gerhard Clemenz & Klaus Gugler, 2006. "Locational choice and price competition: some empirical results for the austrian retail gasoline market," Empirical Economics, Springer, vol. 31(2), pages 291-312, June.
  2. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA.
  3. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  4. Evans, William N & Froeb, Luke M & Werden, Gregory J, 1993. "Endogeneity in the Concentration-Price Relationship: Causes, Consequences, and Cures," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 431-38, December.
  5. Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-42, June.
  6. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
  7. Janet S. Netz & Beck A. Taylor, 2002. "Maximum Or Minimum Differentiation? Location Patterns Of Retail Outlets," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 162-175, February.
  8. Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers.
  9. John S. Heywood & Kristen Monaco & R. Rothschild, 2001. "Spatial Price Discrimination and Merger: The N-Firm Case," Southern Economic Journal, Southern Economic Association, vol. 67(3), pages 672-684, January.
  10. Steven T. Berry & Joel Waldfogel, 2001. "Do Mergers Increase Product Variety? Evidence From Radio Broadcasting," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1009-1025, August.
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Citations

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Cited by:
  1. Ewa, Lechman, 2010. "Concentration in ICTs sector – cross country analysis," MPRA Paper 37488, University Library of Munich, Germany.
  2. Andrew Eckert & Heather Eckert, 2014. "Regional Patterns in Gasoline Station Rationalization in Canada," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 99-122, March.
  3. Pennerstorfer, Dieter & Weiss, Christoph, 2013. "Spatial clustering and market power: Evidence from the retail gasoline market," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 661-675.
  4. Cosnita-Langlais, Andreea, 2012. "Horizontal market concentration: Theoretical insights from spatial models," Research in Economics, Elsevier, vol. 66(1), pages 22-32.

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