Scandinavian Working Papers in Economics
Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics
No 6/2018: Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?
Mai Nguyen-Ones () and Frode Steen ()
Additional contact information
Mai Nguyen-Ones: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Frode Steen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
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.
Keywords: Gasoline markets; market Power; markup estimation; local market competition
34 pages, April 13, 2018
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