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Title: Driving competition in local markets with near-perfect substitutes: an application on the Spanish retail gasoline market
Author: Perdiguero, Jordi
Borrell, Joan-Ramon
Keywords: Indústria petroliera
Competència econòmica
Mètodes de simulació
Petroleum industry and trade
Simulation methods
Issue Date: Jul-2019
Publisher: Springer Verlag
Abstract: Relevant market definition remains a key element in the economic analysis of competition in the gasoline market. However, this is particularly difficult to undertake when competition is local and market power is geographically constrained, as they are in the case of the gasoline market. We analyse how the hypothetical monopolist or Small but Significant Non-Transitory Increase in Prices test performs when defining isochrones based solely on price information and the distance between competitors. We conclude that geographic information systems can be successfully employed in the precise definition of relevant geographic markets in the gasoline retail sector. Their application to the Spanish gasoline market indicates that the relevant geographic market is delineated by a 5- to 6-min travel-time isochrone around each station. Localized market power needs to be taken into account when analysing the adverse effects of mergers and entry regulations on gasoline retailing. To drive competition in these local circumstances, markets need to be delineated on the basis of sufficiently small isochrones since only close rivals seem to compete effectively with each other.
Note: Versió postprint del document publicat a:
It is part of: Empirical Economics, 2019, vol. 57, num. 1, p. 345-364
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ISSN: 0377-7332
Appears in Collections:Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)

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