Competition and pass-through: evidence from isolated markets

Christos Genakos and Mario Pagliero

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We measure how pass-through varies with competition in isolated oligopolistic markets with captive consumers. Using daily pricing data from gas stations on small Greek islands, we study how unanticipated and exogenous changes in excise duties (which vary across different petroleum products) are passed through to consumers in markets with different numbers of retailers. We find that pass-through increases from 0.4 in monopoly markets to 1 in markets with four or more competitors and remains constant thereafter. Moreover, the speed of price adjustment is about 60% higher in more competitive markets. Finally, we show that geographic market definitions based on arbitrary measures of distance across sellers, often used by researchers and competition authorities, result in significant overestimation of the pass-through when the number of competitors is small.

Keywords: pass-through; tax incidence; gasoline; market structure; competition; Greek islands (search for similar items in EconPapers)
JEL-codes: H22 L1 (search for similar items in EconPapers)
Date: 2019-07-26
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://cep.lse.ac.uk/pubs/download/dp1638.pdf (application/pdf)

Related works:
Journal Article: Competition and Pass-Through: Evidence from Isolated Markets (2022)
Working Paper: Competition and Pass-Through: Evidence from Isolated Markets (2019)
Working Paper: Competition and pass-through: evidence from isolated markets (2019)
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:cep:cepdps:dp1638

Access Statistics for this paper

More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Bibliographic data for series maintained by ().