Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 21/2019: Market Power in Retail Gasoline Markets

Mai Nguyen-Ones and Frode Steen ()
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Mai Nguyen-Ones: Dept of Business and Management Science NHH, Postal: NHH, Department of Economics, 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: We estimate a structural model to uncover the degree of competition in retail gasoline markets using daily station-level data on quantity and price from the Swedish market. The structural model enables us to consider key features on both the demand and supply side that are important when evaluating retailers’ ability to obtain market power. Endowed with station-level information on service level, contractual form and number of nearby stations, we take into account the main drivers of differentiation in the local market. Our findings suggest that retailers in general exercise significant intermediate levels of market power. Further, local station characteristics significantly affect to which extent stations are able to extract market power. Results are robust to different estimation methods.

Keywords: Gasoline markets; market power; markup estimation; local market competition

JEL-codes: D22; L13; L25; L81

30 pages, First version: April 13, 2018. Revised: July 1, 2019.

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