The Determinants of Margins in Gasoline Markets

T. Porcher et S. Porcher, 2014 – The Determinants of Margins in Gasoline Markets
Abstract: When studying oligopolies, a tension exists between models supporting tacit collusion and those supporting the non-collusive behavior of firms. Using a panel on retail fuel margins in France over more than twenty years, we find mitigated evidence of collusive behavior in the retail gasoline industry.
On the one hand, we find lower margins when demand is expected to increase in the next period, which is a standard prediction for the non-cooperative models. On the other hand, we also find evidence of tacit collusion as margins respond to input cost changes in the manner that the tacit collusion models predict: margins decline when the expected marginal cost increases. Our results leave open the question of collusion in the retail gasoline market.