IDEAS home Printed from https://ideas.repec.org/p/ris/vhsuwp/2018_180.html
   My bibliography  Save this paper

A new price test in geographic market definition – an application to german retail gasoline market

Author

Listed:
  • Bantle, Melissa

    (Helmut Schmidt University, Hamburg)

  • Muijs, Matthias

    (University of Hohenheim)

Abstract

Market delineation is a fundamental tool in modern antitrust analysis. However, the definition of re- levant markets can be very difficult in practice. This preliminary draft applies a new methodology combining a simple price correlation test with hierarchical clustering -a method known from machine learning- in order to analyze the competitive situation in the German retail gasoline market. Our analysis reveals two remarkable results: At first, there is a uniform pattern across stations of the same brand regarding their maximum daily prices which confirms the claim that prices are partly set centrally. But more importantly, price reactions are also influenced by regional or local market conditions as the price setting of gasoline stations is strongly affected by commuter routes.

Suggested Citation

  • Bantle, Melissa & Muijs, Matthias, 2018. "A new price test in geographic market definition – an application to german retail gasoline market," Working Paper 180/2018, Helmut Schmidt University, Hamburg.
    • Handle: RePEc:ris:vhsuwp:2018_180
    as

    Download full text from publisher

    File URL: https://www.hsu-hh.de/fgvwl/wp-content/uploads/sites/572/2018/08/hsu-wp-vwl-180.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jahn, Vera, 2015. "The Importance of Mittelstand Firms for Regional Apprenticeship Activity - Lessons for Policy -," Working Paper 158/2015, Helmut Schmidt University, Hamburg.
    2. Stigler, George J & Sherwin, Robert A, 1985. "The Extent of the Market," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 555-585, October.
      • Stigler, George J. & Sherwin, Robert A., 1983. "The Extent of the Market," Working Papers 31, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    3. Lauenstein, Philipp & Küster Simic, André, 2016. "Information Processing in Freight and Freight Forward Markets: An Event Study on OPEC Announcements," Working Paper 172/2016, Helmut Schmidt University, Hamburg.
    4. Beckmann, Klaus & Gattke, Susan & Lechner, Anja & Reimer, Lennart, 2016. "Lineare dynamische Konfliktmodelle: ein systematischer Überblick," Working Paper 163/2016, Helmut Schmidt University, Hamburg.
    5. Marc‐André Luik & Amelia Guha Thakurta & Dennis Wesselbaum, 2021. "Child health, human capital, and adult financial behavior," Health Economics, John Wiley & Sons, Ltd., vol. 30(11), pages 2722-2750, November.
    6. Dewenter, Ralf & Heimeshoff, Ulrich & Löw, Franziska, 2017. "Market Definition of Platform Markets," Working Paper 176/2017, Helmut Schmidt University, Hamburg.
    7. Afflatet, Nicolas, 2015. "Fiscal Policy in a Debt Crisis - A Model," Working Paper 160/2015, Helmut Schmidt University, Hamburg.
    8. Dewenter, Ralf & Dulleck, Uwe & Thomas, Tobias, 2016. "Does the 4th estate deliver? Towards more direct measure of political media bias," Working Paper 175/2016, Helmut Schmidt University, Hamburg.
    9. Berlemann, Michael & Luik, Marc-André, 2016. "Institutional Reform and Depositors' Portfolio Choice - Evidence from Bank Account Data," Working Paper 173/2016, Helmut Schmidt University, Hamburg.
    10. Im Winkel, Niklas, 2015. "Rechts? Links? Liberal? Egal? Gründe für die Entstehung verzerrter Medieninhalte und Methoden zur Messung des Bias," Working Paper 157/2015, Helmut Schmidt University, Hamburg.
    11. Dewenter Ralf & Schwalbe Ulrich, 2016. "Preisgarantien im Kraftstoffmarkt," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 17(3), pages 276-288, September.
    12. Beckmann Klaus B. & Dewenter Ralf & Thomas Tobias, 2017. "Can News Draw Blood? The Impact of Media Coverage on the Number and Severity of Terror Attacks," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 23(1), pages 1-16, January.
    13. Nagel, Korbinian, 2016. "A Life Course Perspective on the Income-to-Health Relationship: Macro-Empirical Evidence from Two Centuries," Working Paper 171/2016, Helmut Schmidt University, Hamburg.
    14. Afflatet, Nicolas, 2015. "Public Debt and Borrowing. Are Governments Disciplined by Financial Markets?," Working Paper 156/2015, Helmut Schmidt University, Hamburg.
    15. Beckmann, Klaus & Gattke, Susan & Lechner, Anja & Reimer, Lennart, 2016. "A critique of the Richardson equations," Working Paper 162/2016, Helmut Schmidt University, Hamburg.
    16. Jahn, Vera & Steinhardt, Max Friedrich, 2016. "Innovation and immigration — Insights from a placement policy," Economics Letters, Elsevier, vol. 146(C), pages 116-119.
    17. Beckmann, Klaus B., 2017. "Bounded rationality in differential games," Working Paper 178/2017, Helmut Schmidt University, Hamburg.
    18. Dewenter, Ralf & Linder, Melissa & Thomas, Tobias, 2018. "Can Media Drive the Electorate? The Impact of Media Coverage on Party Affiliation and Voting Intentions," Working Paper 179/2018, Helmut Schmidt University, Hamburg.
    19. Warell, Linda, 2005. "Defining geographic coal markets using price data and shipments data," Energy Policy, Elsevier, vol. 33(17), pages 2216-2230, November.
    20. Nagel, Korbinian, 2016. "A Life Course Perspective on the Income-to-Health Relationship: Macro-Empirical Evidence from two Centuries," VfS Annual Conference 2016 (Augsburg): Demographic Change 145810, Verein für Socialpolitik / German Economic Association.
    21. Patrick Massey, 2000. "Market Definition and Market Power in Competition Analysis - Some Practical Issues," The Economic and Social Review, Economic and Social Studies, vol. 31(4), pages 309-328.
    22. Slade, Margaret E, 1986. "Exogeneity Tests of Market Boundaries Applied to Petroleum Products," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 291-303, March.
    23. Afflatet, Nicolas, 2016. "Deficit Policy within the Framework of the Stability and Growth Pact - Empirical Results and Lessons for the Fiscal Compact," Working Paper 168/2016, Helmut Schmidt University, Hamburg.
    24. Beckmann, Klaus & Gattke, Susan & Reimer, Lennart, 2015. "The Boulding-Richardson Model Revisited," Working Paper 159/2015, Helmut Schmidt University, Hamburg.
    25. Melissa Linder, 2018. "Price cycles in the German retail gasoline market - Competition or collusion?," Economics Bulletin, AccessEcon, vol. 38(1), pages 593-602.
    26. Herzer, Dierk & Nagel, Korbinian, 2017. "The effects of adult and non-adult mortality on long-run economic development: Evidence from a heterogeneous dynamic and cross-sectionally dependent panel of countries between 1800 and 2010," Working Paper 177/2017, Helmut Schmidt University, Hamburg.
    27. Werner, Max, 2016. "Evaluating prediction markets for internal control applications," Working Paper 167/2016, Helmut Schmidt University, Hamburg.
    28. Luik, Marc-André, 2016. "Child Health, Human Capital and Adult Financial Behavior," Working Paper 174/2016, Helmut Schmidt University, Hamburg.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Leonardo C. B. Cardoso & Carlos Frederico A. Uchôa & Williams Huamani & David R. Just & Raúl V. Gomez, 2022. "Price effects of spatial competition in retail fuel markets: the impact of a new rival nearby," Papers in Regional Science, Wiley Blackwell, vol. 101(1), pages 81-105, February.
    2. Korff, Alex, 2021. "Competition on the fast lane: The price structure of homogeneous retail gasoline stations," DICE Discussion Papers 359, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beckmann, Klaus B., 2017. "Bounded rationality in differential games," Working Paper 178/2017, Helmut Schmidt University, Hamburg.
    2. Dewenter, Ralf & Löw, Franziska, 2022. "Endogenous Network Effects," Working Paper 194/2022, Helmut Schmidt University, Hamburg.
    3. Muijs, Matthias & Bantle, Melissa, 2019. "A New Price Test in Geographic Market Definition - An Application to German Retail Gasoline Market," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203564, Verein für Socialpolitik / German Economic Association.
    4. Gual, Jordi, 2003. "Market Definition in the Telecoms Industry," CEPR Discussion Papers 3988, C.E.P.R. Discussion Papers.
    5. Asche, Frank & Gjolberg, Ole & Volker, Teresa, 2003. "Price relationships in the petroleum market: an analysis of crude oil and refined product prices," Energy Economics, Elsevier, vol. 25(3), pages 289-301, May.
    6. Geroski, P. A., 1998. "Thinking creatively about markets," International Journal of Industrial Organization, Elsevier, vol. 16(6), pages 677-695, November.
    7. De Vany, A. & Walls, W.D., 1994. "The Law of One Price in a Network: Arbitrage and Price Dynamics in Natural Gas City Gate Markets," Papers 93-94-17, California Irvine - School of Social Sciences.
    8. Céline Bonnet & Jan Philip Schain, 2020. "An Empirical Analysis Of Mergers: Efficiency Gains And Impact On Consumer Prices," Journal of Competition Law and Economics, Oxford University Press, vol. 16(1), pages 1-35.
    9. Asche, Frank & Osmundsen, Petter & Tveteras, Ragnar, 2002. "European market integration for gas? Volume flexibility and political risk," Energy Economics, Elsevier, vol. 24(3), pages 249-265, May.
    10. Mario Forni, 2004. "Using Stationarity Tests in Antitrust Market Definition," American Law and Economics Review, American Law and Economics Association, vol. 6(2), pages 441-464.
    11. Hayenga, Marvin & O'Brien, Dan, 1991. "Packer Competition, Forward Contracting Price Impacts, and the Relevant Market for Fed Cattle," Staff Papers 232401, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.
    12. Kleit, Andrew N., 2001. "Defining electricity markets: an arbitrage cost approach," Resource and Energy Economics, Elsevier, vol. 23(3), pages 259-270, July.
    13. Hippolyte, Rommell, 2016. "Defining the Relevant Product Market: An Application of Price Tests to the Beer Market in Barbados," MPRA Paper 76183, University Library of Munich, Germany.
    14. Javier Elizalde, 2012. "A theoretical approach to market definition analysis," European Journal of Law and Economics, Springer, vol. 34(3), pages 449-475, December.
    15. Kai-yin Woo & Shu-kam Lee & Paul Shum, 2017. "Analysis of threshold cointegration with asymmetric adjustments in the Hong Kong grocery industry," Applied Economics, Taylor & Francis Journals, vol. 49(55), pages 5591-5600, November.
    16. Anna I. Meleshkina & Irina N. Filippova & Andrey E. Shastitko, 2022. "Empirical geographic market definition for antitrust: The case of the Russian cement market," Upravlenets, Ural State University of Economics, vol. 13(6), pages 15-29, January.
    17. Willem Boshoff, 2006. "Quantitative competition analysis: Stationarity tests in geographic market definition," Working Papers 17/2006, Stellenbosch University, Department of Economics.
    18. Bruce L. Benson & Merle D. Faminow & Milton H. Marquis & Douglas G. Sauer, 1995. "Delineating Spatial Markets Using Multivariate Time Series," The Review of Regional Studies, Southern Regional Science Association, vol. 25(3), pages 247-270, Winter.
    19. Koontz, Stephen R. & Garcia, Philip, 1997. "Meat-Packer Conduct In Fed Cattle Pricing: Multiple-Market Oligopsony Power," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(1), pages 1-17, July.
    20. Nicolas Afflatet & Stephanos Papadamou, 2016. "Public debt and borrowing: Are governments disciplined by financial markets?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1225346-122, December.

    More about this item

    Keywords

    market definition; gasoline market; price tests; competition; k-means clustering; hierarchical clustering;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:vhsuwp:2018_180. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Bekcmann (email available below). General contact details of provider: https://edirc.repec.org/data/egbwhde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.