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Does markup regulation restrict price hikes? Evidence from the oil industry

Author

Listed:
  • Michael L. Polemis

    (University of Piraeus
    Hellenic Competition Commission
    Hellenic Open University)

  • Thanasis Stengos

    (University of Guelph)

Abstract

Using price data on three oil products (gasoline, automotive diesel, and heating oil) that have been recently affected by maximum markup regulation in Greece (March 2022) and employing the prices of the same products in Italy that have not been affected by regulation, we find that employing markup regulation led to a significant increase in both net and final prices equal to 13.8% and 2.4% respectively. The empirical findings postulate that the markup ceiling may act as a focal point for facilitating tacit collusion by monitoring prices and thus enabling a “trigger strategy” mechanism among the market participants in the Greek fuel industry.

Suggested Citation

  • Michael L. Polemis & Thanasis Stengos, 2023. "Does markup regulation restrict price hikes? Evidence from the oil industry," Letters in Spatial and Resource Sciences, Springer, vol. 16(1), pages 1-11, December.
    • Handle: RePEc:spr:lsprsc:v:16:y:2023:i:1:d:10.1007_s12076-023-00339-7
    DOI: 10.1007/s12076-023-00339-7
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    References listed on IDEAS

    as
    1. Christos Genakos & Pantelis Koutroumpis & Mario Pagliero, 2018. "The Impact of Maximum Markup Regulation on Prices," Journal of Industrial Economics, Wiley Blackwell, vol. 66(2), pages 239-300, June.
    2. Christopher R. Knittel & Victor Stango, 2003. "Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards," American Economic Review, American Economic Association, vol. 93(5), pages 1703-1729, December.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Isoni, Andrea & Poulsen, Anders & Sugden, Robert & Tsutsui, Kei, 2013. "Focal points in tacit bargaining problems: Experimental evidence," European Economic Review, Elsevier, vol. 59(C), pages 167-188.
    5. Ashenfelter, Orley & Card, David, 1985. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 648-660, November.
    6. Orley C. Ashenfelter & Daniel S. Hosken & Matthew C. Weinberg, 2013. "The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 239-261, February.
    7. repec:cte:werepe:we1407 is not listed on IDEAS
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    More about this item

    Keywords

    Difference-in-differences; Competition; Markups; Regulation; Greece;
    All these keywords.

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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