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Relevance and Detection Problems of Margin Squeeze – The Case of German Gasoline Prices

Christoph Kleineberg () and Thomas Wein ()
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Christoph Kleineberg: Leuphana University Lueneburg, Germany
Thomas Wein: Leuphana University Lueneburg, Germany

No 355, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: In contrast to the United States, Germany decided to add margin squeeze as a legal offense to German competition law. In response to this, the problems in the gasoline market have caused major debates. This paper examines the pricing strategies by gasoline retailers and discusses the difficulties experienced by regulators dealing with cases of margin squeeze occurrence of the phenomenon and outlines the dilemma of the margin squeeze. First the three possibilities to detect margin squeezes are presented. Afterwards the problems in applying the concept in case of the gasoline market, for which it was initially designed, are discussed. On the one hand, there are very few obvious cases in the gasoline market in which retail prices and wholesale prices are a clear indicator for margin squeeze. On the other hand, applying the “equally-efficient” approach always involves assumptions of having knowledge of the companies’ cost functions. When applying the “equally-efficient”- approach, there are cases of margin squeezes at the cost of having only educated guesses and no solid proof. When considering the wholesale price to detect margin squeeze cases on the gasoline retail market, there are nearly no cases of margin squeezes. The difficulty to find a proper way of calculating equal efficiency or reasonable efficiency and the lack of margin squeeze cases when referring to wholesale and retail prices of gasoline constitute the dilemma of the element of offence “margin squeeze”.

JEL-codes: K21 L12 L42 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-12
New Economics Papers: this item is included in nep-com and nep-ene
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