DO AUCTIONS AND FORCED DIVESTITURES INCREASE COMPETITION? EVIDENCE FOR RETAIL GASOLINE MARKETS

Adriaan R. Soetevent*, Marco A. Haan, Pim Heijnen

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Scopus)

Abstract

To foster competition, governments can intervene by auctioning licenses to operate, or by imposing divestitures. The Dutch government has done exactly that, organizing auctions to redistribute tenancy rights for highway gasoline stations and imposing divestitures of such stations on the four major companies. We evaluate this policy experiment and find that the auctioning of licenses without an obligation to divest has no discernible effect on prices. An obligation to divest lowers prices by 1.3-2.3% at divested sites. Moreover, prices decrease by 0.9-1.2% at sites nearby. This suggests that the observed price decreases are at least partly due to competitive spillovers.

Original languageEnglish
Pages (from-to)467-502
Number of pages36
JournalJournal of Industrial Economics
Volume62
Issue number3
DOIs
Publication statusPublished - Sep-2014

Keywords

  • VERTICAL RELATIONSHIPS
  • SOUTHERN CALIFORNIA
  • EMPIRICAL-EVIDENCE
  • CONTRACT CHANGES
  • PRICE CYCLES
  • ESTIMATORS
  • GAS
  • LAW

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