Tuesday, December 25, 2012
Posted by D. Daniel Sokol
Daniel Albalate (Faculty of Economics, University of Barcelona) and Jordi Perdiguero (Faculty of Economics, University of Barcelona) discuss Entry Regulation Asymmetries and Gasoline Competition in a Mixed Motorway Network.
ABSTRACT: Regulatory and funding asymmetries in the Spanish motorway network produce huge differences in the structure of gasoline markets by motorway type: free or toll. While competition is encouraged among gas stations on free motorways, the regulations for toll motorways allow private concessionaires to auction all gas stations to the same provider, thereby limiting competition and consolidating market power. This paper reports how this regulatory asymmetry results in higher prices and fewer gas stations. Specifically, we show that competition is constrained on toll motorways by the granting of geographical monopolies, resulting in a small number of rivals operating in close proximity to each other, and allowing gas stations to operate as local monopolies. The lack of competition would seem to account for the price differential between toll and free motorways. According to available evidence, deregulation measures affecting to! ll motorway concessions could help to mitigate price inefficiencies and increase consumer welfare.