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What Is the “Right” Geographic Market Definition?

Author

Listed:
  • Christos Genakos
  • Themistoklis Kampouris

Abstract

This paper examines the “right” geographic definition of relevant markets by analyzing how excise tax pass-through varies with local competition in the retail gasoline market of a large metropolitan city. Using a natural experiment from three unanticipated and exogenous fuel tax hikes and detailed station-level price data, we show that average pass-through is invariant to the number of nearby competitors across various geographic definitions. This contrasts with theoretical predictions and prior island-based evidence, suggesting that the entire metropolitan area functions as a single market. Our findings challenge standard isodistance- or isochrone- based market delineations used in academic research and competition policy.

Suggested Citation

  • Christos Genakos & Themistoklis Kampouris, 2026. "What Is the “Right” Geographic Market Definition?," Discussion Papers of DIW Berlin 2154, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2154
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.998061.de/dp2154.pdf
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    Keywords

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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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