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JOURNAL OF APPLIED BUSINESS AND ECONOMICS
Gasoline Price and Competition: New Evidence from Traffic Pattern
Author(s): Baohui Liu
Citation: Baohui Liu, (2020) "Gasoline Price and Competition: New Evidence from Traffic Pattern," Journal of Applied Business and Economics, Vol. 22, Iss.2, pp. 137-146
Article Type: Research paper
Publisher: North American Business Press
Abstract:
Competition is considered as an important factor that influences gasoline prices. In spatial competition, an increased density of competitors has a direct impact on lowering gasoline price. However, prior research omitted an important demand factor: traffic volume. This paper uses a reduced-form approach to test for the relationship between market density and retail gasoline price with and without traffic volume. The omission of traffic volume biases the estimated effect of market density on retail gasoline price and leads to a 61% overstatement. Furthermore, this paper examines the relationship between market density and price dispersion with and without traffic dispersion.
