 Market power and second degree price discrimination in retail gasoline marketsEnergy Economics, 2019, vol. 84, issue C Abstract: Empirical evidence of ‘quality-based’ second degree price discrimination is scarce. The co-existence of regular-grade 10% ethanol-blended gasoline (E10) and regular-grade non-blended gasoline (E0) in a major metropolitan city allows for second degree price discrimination to be examined while eliminating the issue of endogenous product differentiation because the two blends of gasoline are near-perfect substitutes. Using a unique data set including daily price information for 402 retailers that sell only E0 gasoline, only ethanol-blended E10 gasoline, or both blends simultaneously, I find evidence that retailers use second degree price discrimination to segment the population between perceived lower and higher quality gasoline; despite the fact that both blends can safely be used in nearly all vehicles. Additionally, I uncover two elasticities of demand for gasoline and discuss the welfare effects of price changes and market segmentation. Keywords: Price discrimination; Gasoline; Ethanol; Renewable Fuel Standard (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:84:y:2019:i:c:s0140988319303032 DOI: 10.1016/j.eneco.2019.104514 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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