Consumer search costs, geographical concentration, and retail gasoline pricing: Evidence from inland Japan

Eiji Satoh, Ryusuke Iwase, Keita Kamakura, Shinji Sawasato and Saki Tominaga

Japan and the World Economy, 2018, vol. 45, issue C, 1-8

Abstract: We examine determinants of retail transaction and list prices for gasoline using cross-sectional data for gas stations in inland Japan. The study makes two original contributions: it examines inland Japan where gasoline prices at proximate stations theoretically should be identical, and it analyzes retail transaction and list prices for gasoline. Empirical analysis yields three results. First, the concentration of stations correlates negatively with gasoline prices, but its effects are attenuated by increased numbers of uninformed consumers. Second, stations should set retail prices that include markups based on location, their service features, and brand affiliation. Third, they should charge different markups for different grades of gasoline based on concentration of stations and location. Our findings suggest that consumers’ search for stations that set lower price could significantly influence pricing and that providing price information could reduce search costs and gasoline prices, thereby raising social welfare.

Keywords: L13; D43; L81; Inland Japan; Geographical concentration; Retail gasoline pricing; Consumer search cost (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0922142517300683
Full text for ScienceDirect subscribers only

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:eee:japwor:v:45:y:2018:i:c:p:1-8

DOI: 10.1016/j.japwor.2017.11.002

Access Statistics for this article

Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().