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Spatial Pricing in Interdependent Markets: A Case Study of Petrol Retailing in Sheffield

Author

Listed:
  • Xiaoming Ning

    (Department of Resources and Environmental Science, Beijing Normal University, Beijing 100875, People's Republic of China)

  • Robert Haining

    (Department of Geography, University of Cambridge, Cambridge CB2 3EN, England)

Abstract

This paper reports the development of empirical models to explain spatial price variation in an urban area. Models are constructed for petrol price data collected in 1995 and 1997 in Sheffield, England. The 1995 data are modelled by using only supply-side predictors following the collection of supply-side information from field surveys of the retail sites, a site questionnaire survey, and interviews with site managers. The 1997 data are modelled by using supply-side predictors and demand-side predictors that relate to the economic characteristics of the population of consumers. This modelling is based on field surveys of the sites, a new site questionnaire survey, and a household survey. The purpose of this work is to assess supply-side and demand-side factors in explaining spatial price variation. Supply-side predictors are classified into site characteristics, location characteristics, and measures of spatial competition. We examine the relative importance of these different groups of supply-side variables in explaining price variation, with a particular interest in location and competition effects as these relate directly to the spatial and geographical aspects of the problem. Another contribution of the paper is to observe the stability of findings by contrasting the best-fitting models obtained for the 1995 price data to the best-fitting models obtained for the 1997 price data. We find that no demand-side factors are statistically significant. For 1995 a spatial competition variable and a location variable (whether a site is attached to a supermarket) are the consistently important supply-side variables. For 1997 all three categories of supply-side variables are important.

Suggested Citation

  • Xiaoming Ning & Robert Haining, 2003. "Spatial Pricing in Interdependent Markets: A Case Study of Petrol Retailing in Sheffield," Environment and Planning A, , vol. 35(12), pages 2131-2159, December.
    • Handle: RePEc:sae:envira:v:35:y:2003:i:12:p:2131-2159
    DOI: 10.1068/a3636
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    References listed on IDEAS

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    1. Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521315647, October.
    2. Robert Raining & Paul Plummer & Eric Sheppard, 1996. "Spatial Price Equilibrium In Interdependent Markets: Price And Sales Configurations," Papers in Regional Science, Wiley Blackwell, vol. 75(1), pages 41-64, January.
    3. Bruce L. Benson & Merle D. Faminow & Timothy J. Fik, 1992. "Conduct In Spatial Markets: An Empirical Analysis Of Spatial Pricing Behavior," Papers in Regional Science, Wiley Blackwell, vol. 71(1), pages 15-30, January.
    4. Gordon F. Mulligan, 1996. "Myopic Spatial Competition: Boundary Effects And Network Solutions," Papers in Regional Science, Wiley Blackwell, vol. 75(2), pages 155-176, April.
    5. Margaret E. Slade, 1992. "Vancouver's Gasoline-Price Wars: An Empirical Exercise in Uncovering Supergame Strategies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(2), pages 257-276.
    6. Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521305525, October.
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    Cited by:

    1. Alexander Kihm & Nolan Ritter & Colin Vance, 2014. "Is the German Retail Gas Market Competitive? A Spatial-temporal Analysis Using Quantile Regression," Ruhr Economic Papers 0522, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Bergantino, Angela Stefania & Capozza, Claudia & Intini, Mario, 2018. "Empirical investigation of retail gasoline prices," Working Papers 18_5, SIET Società Italiana di Economia dei Trasporti e della Logistica.
    3. Jing Xu & Alan T. Murray, 2019. "Spatial variability in retail gasoline markets," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 581-603, June.
    4. Demet Yilmazkuday & Hakan Yilmazkuday, 2016. "Understanding gasoline price dispersion," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 57(1), pages 223-252, July.
    5. repec:zbw:rwirep:0522 is not listed on IDEAS
    6. Oczkowski, Edward & Wong, Alfred & Sharma, Kishor, 2018. "The impact of major fuel retailers on regional New South Wales petrol prices," Economic Analysis and Policy, Elsevier, vol. 57(C), pages 44-59.

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