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

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 froma 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.

Keywords: Network centrality, Spatial differentiation, Gasoline prices

JEL Classification: C21, D43, L11, L81, R12

Suggested Citation: Suggested Citation

Firgo, Matthias and Pennerstorfer, Dieter and Weiss, Christoph, Centrality and Pricing in Spatially Differentiated Markets: The Case of Gasoline (2015). International Journal of Industrial Organization, Vol. 40, No. 5, 2015, Available at SSRN: https://ssrn.com/abstract=2993150