Centrality and Pricing in Spatially Differentiated Markets: The Case of Gasoline

Christoph Weiss, Dieter Pennerstorfer, Matthias Firgo

Publication: Scientific journalJournal articlepeer-review

Abstract

We highlight the importance of 'centrality' for pricing. Firms characterized by a more central position in a spatial network are more powerful in terms of having a stronger impact on their competitors' prices and on equilibrium prices. These propositions are derived from a simple theoretical model and investigated empirically for the retail gasoline market of Vienna, Austria. We compute a measure of network centrality based on the locations of gasoline stations in the road network. Results from a spatial autoregressive model show that prices of gasoline stations are more strongly correlated with prices of central competitors.
Original languageEnglish
Pages (from-to)81 - 90
JournalInternational Journal of Industrial Organization
Volume40
DOIs
Publication statusPublished - 2015

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502013 Industrial economics

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