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Driving competition in local gasoline markets

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Author Info

  • Jordi Perdiguero

    ()
    (Dept. de Política Econòmica. Grup de Recerca en Governs i Mercats (GiM). Institut d’Economia Aplicada (IREA). Universitat de Barcelona. Spain)

  • Joan-Ramon Borrell

    ()
    (Dept. de Política Econòmica. Grup de Recerca en Governs i Mercats (GiM). Institut d’Economia Aplicada (IREA). Universitat de Barcelona. Spain)

Abstract

Relevant market definition is still a key element of economic analysis of competition in the gasoline market. It is particularly difficult to handle when competition is local and market power is geographically constrained like is the case in the gasoline market. We analyse how the application of the hypothetical monopolist or Small but Significant Non-Transitory Increase in Prices (SSNIP) test performs for defining isochrones using only information on prices and distance among competitors. We conclude that geographic information systems can be very successfully used to define more precisely relevant geographic market in the gasoline retailing. The application to the Spanish gasoline market concludes that geographic relevant market is composed by 5-6 minutes of travel time. Localised market power should be taken into account when analysing the adverse effects of mergers and entry regulations in gasoline retailing. Only drawing small enough isochrones will drive competition in local markets because it is just close rivals that compete effectively with each other.

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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-04.pdf
File Function: First version, 2012
Download Restriction: no

File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-04.pdf
File Function: Revised version, 2012
Download Restriction: no

Bibliographic Info

Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2012-04.

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Length: 34 pages
Date of creation: Mar 2012
Date of revision: Mar 2012
Handle: RePEc:xrp:wpaper:xreap2012-04

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Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Phone: +34+934039653
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Web page: http://www.pcb.ub.edu/xreap
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Related research

Keywords: Gasoline; Market definition; Retailing.;

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Cited by:
  1. Antonio Manresa & Ferran Sancho, 2012. "Leontief versus Ghosh: two faces of the same coin," Working Papers XREAP2012-18, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2012.
  2. Daniel Albalate & Jordi Perdiguero, 2012. "“Entry Regulation Asymmetries and Gasoline Competition in a Mixed Motorway Network”," IREA Working Papers 201218, University of Barcelona, Research Institute of Applied Economics, revised Nov 2012.

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