The competitive impact of hypermarket retailers on gasoline prices

Paul Zimmerman ()

MPRA Paper from University Library of Munich, Germany

Abstract: Hypermarkets are large retail suppliers of general merchandise or grocery items that also sell gasoline, often at very low margins. Using panel data for 1998-2002, this paper estimates the impact of hypermarkets on average state-level retail gasoline prices. The empirical results suggest a robust, economically (and statistically) significant effect of increased competition from hypermarkets. Furthermore, the results also suggest that refiners’ lower the delivered wholesale prices charged to their affiliated lessee-dealer and open-dealer stations in response to increased hypermarket competition, which in turn translates to lower retail (street) prices. The presence of a state motor fuel sales-below-cost (SBC) law may lessen the price-reducing effects from hypermarket competition by 40-67 percent while independently imparting no other offsetting price reductions. Finally, using recently published estimates of the short-run own price elasticity of demand for gasoline, consumer welfare is estimated to have increased in the neighborhood of $488 million over the sample period.

Keywords: Dealer tank wagon; Hypermarkets; Motor fuel SBC laws; Petroleum; Vertical integration (search for similar items in EconPapers)
JEL-codes: L11 L22 L71 (search for similar items in EconPapers)
Date: 2009-06-18
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind, nep-mkt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20248

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