Empirical investigation of retail gasoline prices

Angela Bergantino, Claudia Capozza and Mario Intini
Authors registered in the RePEc Author Service: Lucia Rotaris ()

No 18_4, Working Papers from SIET Società Italiana di Economia dei Trasporti e della Logistica

Abstract: This paper explores the nature of price variation in the retail gasoline sector with a novel approach. An empirical model is proposed that jointly analyses: i) the spatial interaction between stations in price setting; ii) the direct and the indirect effect of local competition on prices; iii) the role of territorial factors, generally neglected in the studies on gasoline prices. For all these purposes, variables at sub-municipal level are constructed. The results of the empirical model, tested on the city of Rome, confirm the spatial price interaction across stations. Moreover, evidence of direct and indirect effects of local competition on prices is found: the competitive forces acting in the gasoline sector are not bounded within a local market but they spill over across local markets. Micro-territorial variables turn out to have a sizeable influence on prices, particularly the real estate value. When these variables are added to the model, the strength of spatial interaction weakens. This suggests that including micro-territorial variables in the empirical specification strongly contributes to explain the variation of gasoline prices and to accurately detect the spatial dependence.

Date: 2018
New Economics Papers: this item is included in nep-dcm, nep-ene, nep-eur and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sit:wpaper:18_4

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