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Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?

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  • Nguyen-Ones, Mai

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Steen, Frode

    (Dept. of Economics, Norwegian School of Economics)

Abstract

Applying detailed consecutive daily micro data at the gasoline station level from Sweden we estimate a structural model to uncover the degree of competition in the gasoline retail market. We find that retailers do exercise market power, but despite the high upstream concentration, the market power is very limited on the downstream level. The degree of market power varies with both the distance to the nearest station and the local density of gasoline stations. A higher level of service tends to raise a seller’s market power; self-service stations have close to no market power. Contractual form and brand identity also seem to matter. We find a clear result: local station characteristics significantly affect the degree of market power. Our results indicate that local differences in station characteristics can more than offset the average market power found for the whole market.

Suggested Citation

  • Nguyen-Ones, Mai & Steen, Frode, 2018. "Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?," Discussion Papers 2018/4, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2018_004
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    2. Neukirch Arne & Wein Thomas, 2019. "Price Gouging at the Pump? The Lerner Index and the German Fuel Market," Review of Economics, De Gruyter, vol. 70(2), pages 157-192, August.
    3. Thomas Wein, 2021. "Why Abandon the Paradise? Stations’ Incentives to Reduce Gasoline Prices at First," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 465-504, December.
    4. Christoph Kleineberg, 2020. "Market definition of the german retail gasoline industry on highways and those in the immediate vicinity," Working Paper Series in Economics 389, University of Lüneburg, Institute of Economics.
    5. Institute of Economics, 2020. "Institut für Volkswirtschaftslehre Forschungsbericht 2019," Working Paper Series in Economics 388, University of Lüneburg, Institute of Economics.
    6. Thomas Wein, 2020. "Why abandoning the paradise? Stations incentives to reduce gasoline prices at first," Working Paper Series in Economics 394, University of Lüneburg, Institute of Economics.

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    More about this item

    Keywords

    Gasoline markets; market power; markup estimation; local market competition;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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