Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, February 1, 2010

The Competitive Impact of Hypermarket Retailers on Gasoline Prices

Posted by D. Daniel Sokol

Paul Zimmerman (FTC) has a very interesting paper with policy implications, The Competitive Impact of Hypermarket Retailers on Gasoline Prices.

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.

http://lawprofessors.typepad.com/antitrustprof_blog/2010/02/the-competitive-impact-of-hypermarket-retailers-on-gasoline-prices.html

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