Competitor analysis

Business

Cournot competition

Excise

Biology

Oligopoly

Macroeconomics

Management

Economics

Microeconomics

Ecology

Monetary economics

Monopoly

Industrial organization

Competition (biology)

American Economic Journal Applied Economics

We measure how pass-through varies with competition in isolated oligopolistic markets with captive consumers. Using daily pricing data from gas stations on small Greek islands, we study how unanticipated and exogenous changes in excise duties are passed through to consumers in markets with different numbers of retailers. We find that pass-through increases from 0.4 in monopoly markets to 1 in markets with four or more competitors and remains constant thereafter. The speed of price adjustment is about 60 percent higher in more competitive markets. Finally, we show that geographic market definitions based on measures of distance across sellers often result in signifi-cant overestimation of the pass-through. (JEL H22, H25, L13, L81)

Competition and Pass-Through: Evidence from Isolated Markets