Price dispersion and price ceiling in a price regulated industry: gasoline retailing in Colombia

Blademir Quiguanas, Dayra Cabrera, Jaime Carabali and Alex Perez ()
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Blademir Quiguanas: Universidad Nacional Abierta y a Distancia UNAD
Dayra Cabrera: Universidad Nacional Abierta y a Distancia UNAD
Jaime Carabali: Banco W
Alex Perez: Banco de la República de Colombia

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2025, vol. 52, issue 4, No 8, 1035-1050

Abstract: Abstract In this work, we study the dispersion of retail gasoline prices in small municipalities in Colombia. These markets are characterized by having a non-binding maximum price regulation. We analyze how the dispersion of prices and distance from the non-binding maximum price respond to variations in wholesale costs. We analyze how the predictions of the consumer search or tacit collusion theories explain the data. The two theories contradict each other in their predictions. Our results show that there is evidence in favor of consumer search models; that is, when there are increases in wholesale costs, price dispersion tends to decrease. On the other hand, we find evidence that the price ceiling does not act as focal points at which stations can collude, as tacit collusion models predict.

Keywords: Price dispersion; Price ceiling; Gasoline markets (search for similar items in EconPapers)
JEL-codes: D82 D83 L11 L94 Q49 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40812-025-00348-1

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