Discussion Paper Details

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

Author(s): Mai Nguyen-Ones and Frode Steen

Publication Date: April 2018

Keyword(s): Gasoline markets, local market competition, market power and markup estimation

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Nguyen-Ones, M and Steen, F. 2018. 'Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?'. London, Centre for Economic Policy Research.