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http://hdl.handle.net/10419/56464
  
Title:The Effects of Gasoline Price Regulations: Experimental Evidence PDF Logo
Authors:Haucap, Justus
Müller, Hans Christian
Issue Date:2012
Series/Report no.:DICE Discussion Paper 47
Abstract:Economic theory suggests that gasoline retail markets are prone to collusive behavior. Oligopoly market structures prevail, market interactions occur frequently, prices are highly transparent, and demand is rather inelastic. A recent sector inquiry in Germany backed suspicions of tacit collusion and suggested to adopt regulatory pricing rules for gas stations similar to those implemented in Austria, parts of Australia, Luxembourg or parts of Canada. In order to increase consumer welfare these rules either restrict the number of price changes per day or they limit the mark‐up for gasoline retail prices. As theoretical predictions about the impact of these measures are mixed and empirical studies rare, we analyze the effects, using an experimental gasoline market in the lab. Our results reveal that two of the suggested rules rather decrease consumer welfare: The Austrian rule which only allows one price increase per day (while price cuts are always possible) and the Luxembourg rule which introduces a maximum markup for retailers. While no rule tends to induce lower retail prices, the Western Australian rule which allows at most one daily price change (no matter whether up or down) does at least not harm consumers.
Subjects:Gasoline Prices
Fuel Prices
Experimental Gasoline Market
Fuel Price Regulation
Retail Price Regulation
Gas Stations
JEL:L13
L71
L81
L88
K23
C90
ISBN:978‐3‐86304‐046‐8
Document Type:Working Paper
Appears in Collections:DICE Discussion Paper, Düsseldorf Institute for Competition Economics (DICE)

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