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Network centrality and market prices: Empirical evidence

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  • Firgo, Matthias
  • Pennerstorfer, Dieter
  • Weiss, Christoph R.

Abstract

We empirically investigate the importance of centrality (holding a central position in a spatial network) for strategic interaction in pricing for the Austrian retail gasoline market. Results from spatial autoregressive models suggest that the gasoline station located most closely to the market center–defined as the 1-median location–exerts the strongest effect on pricing decisions of other stations. We conclude that centrality influences firms’ pricing behavior and further find that the importance of centrality increases with market size.

Suggested Citation

  • Firgo, Matthias & Pennerstorfer, Dieter & Weiss, Christoph R., 2016. "Network centrality and market prices: Empirical evidence," Economics Letters, Elsevier, vol. 139(C), pages 79-83.
    • Handle: RePEc:eee:ecolet:v:139:y:2016:i:c:p:79-83
    DOI: 10.1016/j.econlet.2015.11.032
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    Cited by:

    1. Firgo, Matthias & Kügler, Agnes, 2018. "Cooperative pricing in spatially differentiated markets," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 51-67.

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    More about this item

    Keywords

    Network centrality; Spatial competition; Retail markets; Gasoline prices;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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