What Is the “Right” Geographic Market Definition?

Christos Genakos and Themistoklis Kampouris

No 2154, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic 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.

Keywords: Geographic market definition; gasoline market; competition; pass-through; market structure (search for similar items in EconPapers)
JEL-codes: H22 L1 (search for similar items in EconPapers)
Pages: 32 p.
Date: 2026
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