Driving competition in local markets with near-perfect substitutes: an application on the Spanish retail gasoline market

Driving competition in local markets with near-perfect substitutes: an application on the Spanish... 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 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Empirical Economics Springer Journals

Driving competition in local markets with near-perfect substitutes: an application on the Spanish retail gasoline market

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Publisher
Springer Journals
Copyright
Copyright © 2018 by Springer-Verlag GmbH Germany, part of Springer Nature
Subject
Economics; Econometrics; Statistics for Business/Economics/Mathematical Finance/Insurance; Economic Theory/Quantitative Economics/Mathematical Methods
ISSN
0377-7332
eISSN
1435-8921
D.O.I.
10.1007/s00181-018-1427-6
Publisher site
See Article on Publisher Site

Abstract

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

Journal

Empirical EconomicsSpringer Journals

Published: May 29, 2018

References

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