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

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Listed:
  • Matthias Firgo

    (WIFO)

  • Dieter Pennerstorfer

    (WIFO)

  • Christoph Weiss

Abstract

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.

Suggested Citation

  • Matthias Firgo & Dieter Pennerstorfer & Christoph Weiss, 2012. "Centrality and Pricing in Spatially Differentiated Markets: The Case of Gasoline," WIFO Working Papers 432, WIFO.
  • Handle: RePEc:wfo:wpaper:y:2012:i:432
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    Citations

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    Cited by:

    1. Eleftheriou, Konstantinos & Polemis, Michael, 2016. "Gasoline Price Wars: Spatial Dependence Awakens," MPRA Paper 70037, University Library of Munich, Germany.
    2. repec:eee:regeco:v:64:y:2017:i:c:p:117-136 is not listed on IDEAS
    3. Andreas Karpf & Antoine Mandel & Stefano Battiston, 2017. "Price and Network Dynamics in the European Carbon Market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01484117, HAL.
    4. Ushchev, Philip & Zenou, Yves, 2015. "Price Competition in Product Variety Networks," CEPR Discussion Papers 10862, C.E.P.R. Discussion Papers.
    5. Firgo, Matthias & Pennerstorfer, Dieter & Weiss, Christoph R., 2016. "Network centrality and market prices: Empirical evidence," Economics Letters, Elsevier, pages 79-83.
    6. LeSage, James P. & Vance, Colin & Chih, Yao-Yu, 2017. "A Bayesian heterogeneous coefficients spatial autoregressive panel data model of retail fuel duopoly pricing," Regional Science and Urban Economics, Elsevier, vol. 62(C), pages 46-55.
    7. Nikolic, Adriana & Weiss, Christoph, 2014. "Spatial interactions in location decisions: Empirical evidence from a Bayesian spatial probit model," Department of Economics Working Paper Series 4245, WU Vienna University of Economics and Business.
    8. Dieter Pennerstorfer, 2014. "Price and Quality Competition in Spatial Markets. The Case of Camping Sites," WIFO Working Papers 466, WIFO.

    More about this item

    Keywords

    Network centrality; Spatial differentiation; Gasoline prices;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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