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The competitive impact of hypermarket retailers on gasoline prices

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  • Zimmerman, Paul R.

Abstract

Hypermarkets are large retail suppliers of general merchandise or grocery items that also sell gasoline, often at very low margins. Using panel data for 1998-2002, this paper estimates the impact of hypermarkets on average state-level retail gasoline prices. The empirical results suggest a robust, economically (and statistically) significant effect of increased competition from hypermarkets. Furthermore, the results also suggest that refiners’ lower the delivered wholesale prices charged to their affiliated lessee-dealer and open-dealer stations in response to increased hypermarket competition, which in turn translates to lower retail (street) prices. The presence of a state motor fuel sales-below-cost (SBC) law may lessen the price-reducing effects from hypermarket competition by 40-67 percent while independently imparting no other offsetting price reductions. Finally, using recently published estimates of the short-run own price elasticity of demand for gasoline, consumer welfare is estimated to have increased in the neighborhood of $488 million over the sample period.

Suggested Citation

  • Zimmerman, Paul R., 2009. "The competitive impact of hypermarket retailers on gasoline prices," MPRA Paper 20248, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:20248
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    References listed on IDEAS

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    Cited by:

    1. Gius, Mark, 2013. "Regulatory restrictions and energy: The impact of the Jones Act on spot gasoline prices," Energy Policy, Elsevier, vol. 62(C), pages 1058-1063.
    2. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2016. "Selling gasoline as a by-product: The impact of market structure on local prices," DICE Discussion Papers 240, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Matias Busso & Sebastian Galiani, 2019. "The Causal Effect of Competition on Prices and Quality: Evidence from a Field Experiment," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 33-56, January.

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    More about this item

    Keywords

    Dealer tank wagon; Hypermarkets; Motor fuel SBC laws; Petroleum; Vertical integration;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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