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Price Dispersion, Search Costs and Spatial Competition: Evidence from the Austrian Retail Gasoline Market

By  |  February 4, 2013

Posted by D. Daniel Sokol

Bernd W. Jost (Vienna University of Economics and Business) analyzes Price Dispersion, Search Costs and Spatial Competition: Evidence from the Austrian Retail Gasoline Market

ABSTRACT: A variety of models explains the behavior of prices and price dispersion with the existence of information dierentials between dierent consumer groups. Dierences in model predictions on the eect of an increase in the number of sellers on the equilib- rium price distribution are associated with the triangulation of competition intensity, consumer search and rms’ pricing decisions. I analyze the price distribution of diesel in the Austrian retail gasoline market and test predictions of the impact of the fraction of informed and uninformed consumers on the mean price and price variance. Further, introducing two measures of spatial competition, the relation of local competition be- tween stations and the mean and variance are examined.