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Uniform Gasoline Price Regulation: Consequences for Consumer Welfare

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  • Michael Keeley
  • Kenneth Elzinga

Abstract

In this paper, we assess the long-run implications for consumer welfare of proposed uniform gasoline price regulation. Such regulation would allow lessee dealers to ignore the terms of their lease agreements and purchase gasoline at the 'rack' (i.e., a wholesale distribution terminal) or from whomever and wherever they choose (most typically a 'jobber', i.e., an independent distributor). We show that such regulation would harm consumer welfare by raising wholesale and retail prices without benefiting lessee dealers. Prices would increase because the proposed regulation would prohibit efficient pricing that reflects differences in costs and demand that vary by geographic area and by type of distribution. We also show that even under the assumption that price differences result solely from price discrimination, uniform price regulation will not necessarily benefit consumers or all lessee dealers.

Suggested Citation

  • Michael Keeley & Kenneth Elzinga, 2003. "Uniform Gasoline Price Regulation: Consequences for Consumer Welfare," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(2), pages 157-168.
    • Handle: RePEc:taf:ijecbs:v:10:y:2003:i:2:p:157-168
    DOI: 10.1080/13571510305062
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    References listed on IDEAS

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    1. William Comanor & Jon Riddle, 2003. "The Costs of Regulation: Branded Open Supply and Uniform Pricing of Gasoline," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(2), pages 135-155.
    2. Blass, Asher A & Carlton, Dennis W, 2001. "The Choice of Organizational Form in Gasoline Retailing and the Cost of Laws That Limit That Choice," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 511-524, October.
    3. Barron, John M & Umbeck, John R, 1984. "The Effects of Different Contractual Arrangements: The Case of Retail Gasoline Markets," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 313-328, October.
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    Cited by:

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    2. Yuya Sasaki & Arthur Caplan, 2008. "Matching Heterogeneous Traders in Quantity-Regulated Markets," Computational Economics, Springer;Society for Computational Economics, vol. 31(4), pages 341-362, May.

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