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Price dispersion and price ceiling in a price regulated industry: gasoline retailing in Colombia

Author

Listed:
  • Blademir Quiguanas

    (Universidad Nacional Abierta y a Distancia UNAD)

  • Dayra Cabrera

    (Universidad Nacional Abierta y a Distancia UNAD)

  • Jaime Carabali

    (Banco W)

  • Alex Perez

    (Banco de la República de Colombia)

Abstract

In this work, we study the dispersion of retail gasoline prices in small municipalities in Colombia. These markets are characterized by having a non-binding maximum price regulation. We analyze how the dispersion of prices and distance from the non-binding maximum price respond to variations in wholesale costs. We analyze how the predictions of the consumer search or tacit collusion theories explain the data. The two theories contradict each other in their predictions. Our results show that there is evidence in favor of consumer search models; that is, when there are increases in wholesale costs, price dispersion tends to decrease. On the other hand, we find evidence that the price ceiling does not act as focal points at which stations can collude, as tacit collusion models predict.

Suggested Citation

  • Blademir Quiguanas & Dayra Cabrera & Jaime Carabali & Alex Perez, 2025. "Price dispersion and price ceiling in a price regulated industry: gasoline retailing in Colombia," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 52(4), pages 1035-1050, December.
    • Handle: RePEc:spr:epolin:v:52:y:2025:i:4:d:10.1007_s40812-025-00348-1
    DOI: 10.1007/s40812-025-00348-1
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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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