Entry Regulation Asymmetries and Gasoline Competition in a Mixed Motorway Network

Daniel Albalate and Jordi Perdiguero

No 201218, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: Regulatory and funding asymmetries in the Spanish motorway network produce huge differences in the structure of gasoline markets by motorway type: free or toll. While competition is encouraged among gas stations on free motorways, the regulations for toll motorways allow private concessionaires to auction all gas stations to the same provider, thereby limiting competition and consolidating market power. This paper reports how this regulatory asymmetry results in higher prices and fewer gas stations. Specifically, we show that competition is constrained on toll motorways by the granting of geographical monopolies, resulting in a small number of rivals operating in close proximity to each other, and allowing gas stations to operate as local monopolies. The lack of competition would seem to account for the price differential between toll and free motorways. According to available evidence, deregulation measures affecting toll motorway concessions could help to mitigate price inefficiencies and increase consumer welfare.

Keywords: Geographical competition; Regional Monopolies; Gasoline prices; Motorways JEL classification: L11; L12; L43 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-11, Revised 2012-11
New Economics Papers: this item is included in nep-com, nep-ene, nep-reg, nep-tre and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:201218

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