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Centrality and Pricing in Spatially Differentiated Markets: The Case of Gasoline

  • Matthias Firgo

    (WIFO)

  • Dieter Pennerstorfer

    (WIFO)

  • Christoph Weiss

This paper highlights the importance of "centrality" for pricing. Firms characterised by a more central position in a spatial network are more powerful in terms of having a stronger impact on their competitors' prices and on equilibrium prices. These propositions are derived from a simple theoretical model and tested empirically for the retail gasoline market in Vienna (Austria). We compute different measures of network centrality by using information on the locations of gasoline stations in the road network. Results from a spatial autoregressive model confirm that the strategic interaction in pricing between competitors is significantly related to their degree of centrality.

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Paper provided by WIFO in its series WIFO Working Papers with number 432.

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Length: 37 pages
Date of creation: 28 Aug 2012
Date of revision:
Handle: RePEc:wfo:wpaper:y:2012:i:432
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  1. Lewis, Matt & Noel, Michael, 2009. "The Speed of Gasoline Price Response in Markets With and Without Edgeworth Cycles," University of California at San Diego, Economics Working Paper Series qt8j36j1s1, Department of Economics, UC San Diego.
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  6. Madden Paul & Pezzino Mario, 2011. "Oligopoly on a Salop Circle with Centre," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-30, January.
  7. Bouckaert, Jan, 2000. "Monopolistic competition with a mail order business," Economics Letters, Elsevier, vol. 66(3), pages 303-310, March.
  8. Justine S. Hastings, 2004. "Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California," American Economic Review, American Economic Association, vol. 94(1), pages 317-328, March.
  9. Lance J. Bachmeier & James M. Griffin, 2003. "New Evidence on Asymmetric Gasoline Price Responses," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 772-776, August.
  10. Sridhar Balasubramanian, 1998. "Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers," Marketing Science, INFORMS, vol. 17(3), pages 181-195.
  11. Matthew Lewis, 2008. "PRICE DISPERSION AND COMPETITION WITH DIFFERENTIATED SELLERS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 654-678, 09.
  12. J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar.
  13. Braid, Ralph M., 1989. "Retail competition along intersecting roadways," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 107-112, February.
  14. Benjamin Atkinson & Andrew Eckert & Douglas S. West, 2009. "Price Matching And The Domino Effect In A Retail Gasoline Market," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 568-588, 07.
  15. Dieter Pennerstorfer, 2009. "Spatial price competition in retail gasoline markets: evidence from Austria," The Annals of Regional Science, Springer, vol. 43(1), pages 133-158, March.
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