Spatial competition between gas stations: how market structure relates to gasoline prices [Hebrew]

Abstract

In the market for retail gasoline in Israel, I exploit spatial variation in local market structure to study the effect of competition on prices. I find substantial differences between the four largest firms and the rest, both in price levels and in response patterns to competitive pressure, implying that the presence of small competitors particularly contributes to lower retail prices. The study calls for pro-competitive action by regulators such as lowering the barriers to entry faced by small firms, encouraging the opening of new stations, and setting uniform policies dealing with vertical contracts. The results of this paper also serve to establish and inform the Competition Authority’s stance regarding long term operation and land lease contracts of gas stations.