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Search and equilibrium prices: Theory and evidence from retail diesel

Luís M. B. Cabral, Dominik Schober and Oliver Woll

No 19-018, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We examine the relation between consumer search and equilibrium prices when collusion is endogenously determined. We develop a theoretical model and show that average price is a U-shaped function of the measure of searchers: prices are highest when there are no searchers (local monopoly power) or when there are many searchers (and sellers opt to collude). We test this prediction with diesel retail prices in Dortmund, Germany. We estimate a U-shaped relation with statistical precision and a €.025/liter price variation due to the variation in the measure of searchers.

Keywords: Collusion; Cartelization; Fuel Retailing; Search; Competitive Intensity (search for similar items in EconPapers)
JEL-codes: L1 L4 L5 L9 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene and nep-ind
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:19018

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