The Competitive Impact of Hypermarket Retailers on Gasoline Prices

Posted by D. Daniel Sokol

Paul R. Zimmerman (FTC) has a really interesting article on 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. This paper estimates the impact of hypermarkets on average state-level retail gasoline prices and margins. The empirical results indicate an economically and statistically significant price-decreasing effect of increased hypermarket competition. The estimations 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 adoption of sales-below-cost laws may lessen the price-reducing effects from hypermarket competition.