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Competition and Coordination in the Mexican Retail Market for Gasoline

Author

Listed:
  • Contreras Astiazarán Benjamín
  • Leal Vizcaíno René
  • Mosqueda Jordán
  • Salcedo Alejandrina

Abstract

We document the following stylized facts for the Mexican retail market for gasoline using data for 2018-2019: (1) consumer prices adjust slower than wholesale prices; (2) more competition, in the form of a higher density of stations, implies lower markups and lower prices; and (3) more competition implies faster pass-through. However, we find geographical differences in the speed of pass-through that cannot be explained by differences in station density. We conjecture that coordination on high prices could be offsetting competitive pressure in some locations. We build a classifier that separates municipalities into two categories depending on whether the relative price concentration is on "high" prices or "low" prices. In the first type of municipalities, the price concentration is correlated positively with the price level and negatively with pass-through. For concentration in "low" prices the signs of the correlations are reversed.

Suggested Citation

  • Contreras Astiazarán Benjamín & Leal Vizcaíno René & Mosqueda Jordán & Salcedo Alejandrina, 2020. "Competition and Coordination in the Mexican Retail Market for Gasoline," Working Papers 2020-15, Banco de México.
    • Handle: RePEc:bdm:wpaper:2020-15
    as

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    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7BC3F5360B-39DC-6710-05F3-BC8042F81E7E%7D.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Gasoline; Pass-through; Geographic Competition; Price Coordination;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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