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Regulation, competition and fraud: evidence from retail gas stations in Mexico

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  • Arteaga, Julio Cesar
  • Flores, Daniel

Abstract

Mexican gas stations across the country buy and sell gasoline at regulated common prices. Therefore, authorities that set these prices do not take into account competition conditions of each market. In this paper we establish the effect of a regulated mark-up price as well as competition on the incentives that gas stations in Mexico have to dispense less amount of gasoline than what consumers pay for. The results of theoretical and empirical work indicate that a higher regulated mark-up price reduces the incentives of gas stations to cheat. Similarly, more intense competition among the retailers of a given market decreases the average shortage.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34187.

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Date of creation: 18 Oct 2010
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Handle: RePEc:pra:mprapa:34187

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Keywords: gasoline pricing; regulation; competition; fraud;

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  1. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  2. Borenstein, S. & Shepard, A., 1993. "Dynamic Pricing in Retail Gazoline Markets," Papers 93-22, California Davis - Institute of Governmental Affairs.
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  7. Marvel, Howard P, 1978. "Competition and Price Levels in the Retail Gasoline Market," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 252-58, May.
  8. Severin Borenstein, 1991. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 354-369, Autumn.
  9. Barron, John M. & Taylor, Beck A. & Umbeck, John R., 2004. "Number of sellers, average prices, and price dispersion," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1041-1066, November.
  10. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  11. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-61, October.
  12. Geithman, Frederick E & Marvel, Howard P & Weiss, Leonard W, 1981. "Concentration, Price and Critical Concentration Ratios," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 346-53, August.
  13. Sen, Anindya, 2003. "Higher prices at Canadian gas pumps: international crude oil prices or local market concentration? An empirical investigation," Energy Economics, Elsevier, vol. 25(3), pages 269-288, May.
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Cited by:
  1. Obradovits, Martin, 2012. "Austrian-style gasoline price regulation: How it may backfire," MPRA Paper 42529, University Library of Munich, Germany.

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