Empir Econ https://doi.org/10.1007/s00181-018-1427-6 Driving competition in local markets with near-perfect substitutes: an application on the Spanish retail gasoline market 1 2 Jordi Perdiguero · Joan Ramon Borrell Received: 3 October 2013 / Accepted: 14 February 2018 © Springer-Verlag GmbH Germany, part of Springer Nature 2018 Abstract Relevant market deﬁnition remains a key element in the economic analysis of competition in the gasoline market. However, this is particularly difﬁcult to under- take 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 mar- ket 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
Empirical Economics – Springer Journals
Published: May 29, 2018
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