Abstract:A variety of models provide differing predictions regarding the effect of an increase in the number of competitors in a market (seller density) on prices and price dispersion. We review different approaches to generating equilibrium price dispersion and then empirically estimate the relationship between seller density, average product price, and price dispersion in the retail gasoline industry using four unique gasoline price data sets. Controlling for station-level characteristics, we find that an increase in station density consistently decreases both price levels and price dispersion across four geographical areas.
JEL Codes: L13, D43, D83
This paper is a theoretical and empirical investigation into the formation and initial distribution of property rights. Violence is singled out as a major constraint on this formation process. Its role is explicitly modeled in a choice theoretic framework and some of the implications are tested using data collected from contracts written during the California gold rush of 1848.
This paper develops a theory of vertical and horizontal product differentiation to explain observed price-cost margin differentials for goods that differ in quality. The difference in price-cost margins between the high-and low-quality good is shown to depend positively on consumers' average valuation for incremental increases in quality and positively on the distance to each competitor's closest rival. These predictions are largely supported using an extensive station-level data set of premium and regular unleaded gasoline prices from the Los Angeles Basin area from 1992 -1995
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