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Price strategies of independent and branded dealers in retail gas market. The case of a contract reform in Spain

Pilar Cuadrado (), Aitor Lacuesta (), María Matea Rosa () and Francisco Palencia-González ()
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Pilar Cuadrado: Banco de España

No 1818, Working Papers from Banco de España, Working Papers Homepage

Abstract: This paper analyses how the contract structure between gas stations and the wholesale operator affects price strategies. Using daily data on prices of different gas stations the paper finds that independent dealers charge lower margins than other dealers with different contracts. One potential hypothesis is that this is the case because independent stations react more to the number of competitors. We use the introduction of a discretional regional excise duty (IVMDH) on gas stations to check the reaction of markups to changes in marginal costs of the actual number of competitors. Results are consistent with the idea that regardless the type of contract all dealers react notably to the increases in relative marginal costs by decreasing average markups. We use those results to interpret the inexistent reduction in markups that followed a change in the Spanish regulation that took place in 2013 fostering competition in the retail sector. One potential interpretation is that the big increase in independent stations following the reform was not considered an increase in actual competition for most of the incumbent stations.

Keywords: competition; oligopoly; pass-through; gasoline; excise duty (search for similar items in EconPapers)
JEL-codes: D40 H22 H23 L13 Q41 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2018-06
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur and nep-knm
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1818

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