What is the “Right†Geographic Market Definition?

Christos Genakos and Themistoklis Kampouris

No 21091, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper examines the “right†geographic definition of relevant markets by analyzing how excise tax pass-through varies with local competition in the retail gasoline market of a large metropolitan city. Using a natural experiment from three unanticipated and exogenous fuel tax hikes and detailed station-level price data, we show that average pass-through is invariant to the number of nearby competitors across various geographic definitions. This contrasts with theoretical predictions and prior island-based evidence, suggesting that the entire metropolitan area functions as a single market. Our findings challenge standard isodistance- or isochrone-based market delineations used in academic research and competition policy.

JEL-codes: H22 L1 (search for similar items in EconPapers)
Date: 2026-01
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