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Regulating gasoline retail markets: The case of Germany

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  • Wittmann, Nadine
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    In 2011, price peaks in retail gasoline prices caused public outrage and attracted the attention of German regulatory agencies. After having examined the market, competition authorities concluded that tacit collusion existed but could not easily be prosecuted under given competition law. In several other countries, various types of regulatory schemes are implemented to tackle tacit collusive behavior, e.g., there are price ceilings established in Luxembourg or per day limits of price increases given in Austria. However, research has found that none of them has led to satisfactory results. Hence, the following paper proposes a different regulatory approach, i.e., the implementation of corrective taxes. Results show that a specially tailored tax on price successfully manages to render collusion an unprofitable business by collecting marginal profits and that the inherent vice of the gasoline retail market, i.e., the transparency that enables tacit-and therefore non-prosecutable-collusion, could be turned into a regulatory virtue as it becomes a powerful means to help successfully tackle imperfect competition and to bring about a more efficient market outcome.

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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2014-33
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    File URL: https://www.econstor.eu/bitstream/10419/102722/1/798405651.pdf
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    Article provided by Kiel Institute for the World Economy (IfW) in its journal Economics: The Open-Access, Open-Assessment E-Journal.

    Volume (Year): 8 (2014)
    Issue (Month): ()
    Pages: 1-33

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    Handle: RePEc:zbw:ifweej:201433
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    1. Suvankulov, Farrukh & Lau, Marco Chi Keung & Ogucu, Fatma, 2012. "Price regulation and relative price convergence: Evidence from the retail gasoline market in Canada," Energy Policy, Elsevier, vol. 40(C), pages 325-334.
    2. Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2012. "Demand for gasoline is more price-inelastic than commonly thought," Energy Economics, Elsevier, vol. 34(1), pages 201-207.
    3. Haucap, Justus & Müller, Hans Christian, 2012. "The Effects of Gasoline Price Regulations: Experimental Evidence," DICE Discussion Papers 47, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Snorre Kverndokk & Knut Einar Rosendahl, 2013. "Effects of Transport Regulation on the Oil Market: Does Market Power Matter?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(3), pages 662-694, 07.
    5. Zhongmin Wang, 2009. "(Mixed) Strategy in Oligopoly Pricing: Evidence from Gasoline Price Cycles Before and Under a Timing Regulation," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 987-1030, December.
    6. Danielsen, Albert L., 1979. "Constraints on the world oil monopoly price: A comment," Resources and Energy, Elsevier, vol. 2(1), pages 97-100, September.
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