Sequential price setting with price-matching guarantees a theoretical and empirical analysis for the german petrol market
Publikationsart | Arbeitspapier/Diskussionspapier |
Autoren | Dewenter, Ralf; Schwalbe, Ulrich; Trost, Michael |
Erscheinungsjahr | 2017 |
Abstract
The paper analyses the effects of a price guarantee or meeting competition clauses granted by the petrol company Shell on the prices for petrol in Germany. We develop a theoretical model to capture the spatial and sequential nature of price setting in the German petrol market. The results of this model are compared with an empirical assessment of the impact of the price guarantee using data from the Market Transparency Unit of the German Federal Cartel Office. Using a difference-in-differences approach, it is demonstrated that this price guarantee, as predicted in the model, has led to an increase in the prices at Shell petrol stations as well as the price level in the relevant geographic market.