Price Competition in Border and Non-Border Areas: The Case of the Dutch Market of Gasoline Retailers

Wolter H. J. Hassink and Frederik T. Schut

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2008, vol. 54, issue 2, 95-122

Abstract: This article investigates the extent of price competition in different geographical markets of gasoline retailers in the Netherlands. Exploiting ex ante information on different competitive regimes in border and non-border areas, we show that data on price levels and the degree of price dispersion can be sufficient to estimate the extent of price competition in both areas. Our sample includes information from 1998, 2001 and 2003. Estimation results imply that although price competition was stronger in the border than in non-border areas, price competition was not very effective in constraining prices in 1998 and 2001. In 2003, however, the extent of price competition in both border and non-border areas has increased, which can be explained by the entry of unmanned retail stations that operate at lower cost and that are not subject to vertical restraints from large oil companies.

Keywords: competition; price setting; travel costs; price dispersion; retail gasoline market (search for similar items in EconPapers)
JEL-codes: D4 L81 (search for similar items in EconPapers)
Date: 2008
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