Welfare impact of subsidies in oligopolistic markets: Evidence from Japan's gasoline market

Eiji Satoh, Kaho Hirano, Taiga Sato, Eiki Shimada, Ayana Sumiyoshi, Satoshi Takahashi, Hiroshi Tamaki, Sora Yamamoto and Kakeru Yamaguchi

Energy Policy, 2025, vol. 206, issue C

Abstract: This study empirically examines the welfare effect of government subsidies in Japan's oligopolistic gasoline market. We conducted a simulation analysis that incorporated the external costs associated with automobile use. The total deadweight loss from January 2022 to March 2024 was approximately 377.8 billion yen, which suggests that even in oligopolistic markets, lowering prices through subsidies worsens social welfare because of high external costs. Government policies to combat unprecedented gasoline price increases are not sustainable and should be terminated. Rather, gasoline prices should be increased to improve social welfare.

Keywords: Externality; Gasoline; Oligopolistic market; Subsidy; Welfare (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:206:y:2025:i:c:s0301421525002757

DOI: 10.1016/j.enpol.2025.114768

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