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Regulation of retail gasoline prices

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  • Angerer, Martin

Abstract

Three regulatory frameworks, (i) price changes are allowed only once per day; (ii) increases are allowed once a day at a specific time, but decreases are allowed at any time; and (iii) a maximum markup is allowed, are compared in a lab experiment to an unregulated benchmark market without any regulation. We examine them in a simple spatial model with elastic demand. The results reveal that the three price regulation systems differ significantly regarding their impact on gas station profits and consumer welfare. Allowing price changes only once per day seems favorable, while restricting price increases leads to higher prices.

Suggested Citation

  • Angerer, Martin, 2020. "Regulation of retail gasoline prices," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319308487
    DOI: 10.1016/j.frl.2019.101331
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    References listed on IDEAS

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    More about this item

    Keywords

    Gasoline; Market; Retail; Oligopoly; Experiment; Regulation;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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