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Price strategies of independent and branded dealers in retail gas market. The case of a contract reform in Spain

Author

Listed:
  • Pilar Cuadrado

    () (Banco de España)

  • Aitor Lacuesta

    () (Banco de España)

  • María de los Llanos Matea

    () (Banco de España)

  • F. Javier Palencia-González

    () (UNED)

Abstract

This paper analyses how the contract structure between gas stations and the wholesale operator affects price strategies. Using daily data on prices of different gas stations the paper finds that independent dealers charge lower margins than other dealers with different contracts. One potential hypothesis is that this is the case because independent stations react more to the number of competitors. We use the introduction of a discretional regional excise duty (IVMDH) on gas stations to check the reaction of markups to changes in marginal costs of the actual number of competitors. Results are consistent with the idea that regardless the type of contract all dealers react notably to the increases in relative marginal costs by decreasing average markups. We use those results to interpret the inexistent reduction in markups that followed a change in the Spanish regulation that took place in 2013 fostering competition in the retail sector. One potential interpretation is that the big increase in independent stations following the reform was not considered an increase in actual competition for most of the incumbent stations.

Suggested Citation

  • Pilar Cuadrado & Aitor Lacuesta & María de los Llanos Matea & F. Javier Palencia-González, 2018. "Price strategies of independent and branded dealers in retail gas market. The case of a contract reform in Spain," Working Papers 1818, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:1818
    as

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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/18/Files/dt1818e.pdf
    File Function: First version, June 2018
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    More about this item

    Keywords

    competition; oligopoly; pass-through; gasoline; excise duty;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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