Alcohol prohibition and pricing at the pump

Kai Fischer

No 386, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: Firms often sell a transparent base product and a valuable add-on product. If only some consumers are aware of the latter, the add-on's effect on the base product's price will be ambiguous. Cross-subsidization between products to bait uninformed consumers might lower, intrinsic utility from the add-on for informed consumers might raise the price. We study this trade-off in the gasoline market by exploiting an alcohol sales prohibition at stations as an exogenous shifter of add-on availability. Gasoline margins drop by 5% during the prohibition. The effect is mediated by shop variety and local competition. Implications for gasoline market definition arise.

Keywords: Off-Premise Alcohol Prohibition; Gasoline Market; Multi-Product Firms (search for similar items in EconPapers)
JEL-codes: L11 L91 R41 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/251471/1/1796682047.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:386

Access Statistics for this paper

More papers in DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).