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Spatial clustering and market power: Evidence from the retail gasoline market

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  • Pennerstorfer, Dieter
  • Weiss, Christoph

Abstract

We investigate the impact of local market power and ‘spatial clustering’ on prices in the retail gasoline market. The acquisition of Aral stations from BP in the Austrian gasoline market in 2003 provides a ‘quasi-experiment’ for identification of the causal effects of changes in spatial clustering on retail prices for a panel of gasoline stations. Our econometric analysis suggests that spatial clustering of gasoline stations reduces the degree of competition between firms and increases equilibrium prices. Merger simulations show that ignoring merger-induced changes in spatial characteristics will lead to a significant bias in the evaluation of merger effects.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:regeco:v:43:y:2013:i:4:p:661-675
    DOI: 10.1016/j.regsciurbeco.2013.04.002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bernardo, Valeria & Borrell, Joan-Ramon & Perdiguero, Jordi, 2016. "Fast charging stations: Simulating entry and location in a game of strategic interaction," Energy Economics, Elsevier, vol. 60(C), pages 293-305.
    2. repec:eee:joreco:v:34:y:2017:i:c:p:102-116 is not listed on IDEAS
    3. repec:eee:regeco:v:64:y:2017:i:c:p:117-136 is not listed on IDEAS
    4. Firgo, Matthias & Kügler, Agnes, 2014. "Detecting Collusion in Spatially Differentiated Markets," Department of Economics Working Paper Series 4347, WU Vienna University of Economics and Business.
    5. Firgo, Matthias & Pennerstorfer, Dieter & Weiss, Christoph R., 2015. "Centrality and pricing in spatially differentiated markets: The case of gasoline," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 81-90.
    6. Dieter Pennerstorfer & Franz Sinabell, 2013. "Spatial Price Differentiation and Regional Market Power. The Case of Food-Retailing in Austria," WIFO Working Papers 458, WIFO.
    7. Nikolic, Adriana & Weiss, Christoph, 2014. "Spatial interactions in location decisions: Empirical evidence from a Bayesian spatial probit model," Department of Economics Working Paper Series 4245, WU Vienna University of Economics and Business.
    8. Dieter Pennerstorfer, 2014. "Price and Quality Competition in Spatial Markets. The Case of Camping Sites," WIFO Working Papers 466, WIFO.

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    Keywords

    Spatial clustering; Gasoline prices; Merger;

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