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Reformulating competition? Gasoline content regulation and wholesale gasoline prices

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  • Brown, Jennifer
  • Hastings, Justine
  • Mansur, Erin T.
  • Villas-Boas, Sofia Berto

Abstract

The 1990 Clean Air Act Amendments stipulated gasoline content requirements for metropolitan areas with air pollution levels above predetermined federal thresholds. The legislation led to exogenous changes in the type of gasoline required for sale across U.S. metropolitan areas. This paper uses a panel of detailed wholesale gasoline price data to estimate the effect of gasoline content regulation on wholesale prices and price volatility. We investigate the extent to which the estimated price effects are driven by changes in the number of suppliers versus geographic segmentation resulting from regulation. We find that prices in regulated metropolitan areas increase significantly, relative to a control group, by an average of 3 cents per gallon. The price effect, however, varies by 8 cents per gallon across regulated markets and the heterogeneity across markets is correlated with the degree of geographic isolation generated by the discontinuous regulatory requirements.
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Suggested Citation

  • Brown, Jennifer & Hastings, Justine & Mansur, Erin T. & Villas-Boas, Sofia Berto, 2007. "Reformulating competition? Gasoline content regulation and wholesale gasoline prices," CUDARE Working Papers 120475, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:120475
    DOI: 10.22004/ag.econ.120475
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    References listed on IDEAS

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    1. Nelson, Randy A & Tietenberg, Tom & Donihue, Michael R, 1993. "Differential Environmental Regulation: Effects on Electric Utility Capital Turnover and Emissions," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 368-373, May.
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    3. Wayne B. Gray & Ronald J. Shadbegian, 1998. "Environmental Regulation, Investment Timing, and Technology Choice," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 235-256, June.
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    5. Chouinard Hayley H & Perloff Jeffrey M, 2007. "Gasoline Price Differences: Taxes, Pollution Regulations, Mergers, Market Power, and Market Conditions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-28, January.
    6. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    7. Chouinard Hayley H & Perloff Jeffrey M, 2007. "Gasoline Price Differences: Taxes, Pollution Regulations, Mergers, Market Power, and Market Conditions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-28, January.
    8. repec:bla:jindec:v:46:y:1998:i:2:p:235-56 is not listed on IDEAS
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