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Price Competition in Border and Non-Border Areas: The Case of the Dutch Market of Gasoline Retailers
Hassink, Wolter H. J | Schut, Frederik T
Applied Economics Quarterly, Vol. 54 (2008), Iss. 2 : pp. 95–122
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1Utrecht University, Utrecht School of Economics, Janskerkhof 12, 3512 BL Utrecht, The Netherlands. Phone: (+31) – 30 253 9800.
2Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands. Phone (+31) – 10 408 8558.
Abstract
This article investigates the extent of price competition in different geographical markets of gasoline retailers in the Netherlands. Exploiting ex ante information on different competitive regimes in border and non-border areas, we show that data on price levels and the degree of price dispersion can be sufficient to estimate the extent of price competition in both areas. Our sample includes information from 1998, 2001 and 2003. Estimation results imply that although price competition was stronger in the border than in non-border areas, price competition was not very effective in constraining prices in 1998 and 2001. In 2003, however, the extent of price competition in both border and non-border areas has increased, which can be explained by the entry of unmanned retail stations that operate at lower cost and that are not subject to vertical restraints from large oil companies.