Have the Auctions of Tenancy Rights to operate Gasoline Stations along State-run Highways increased Price Competition?
Since 2002, the Dutch government has been organizing annual auctions of tenancy rights to operate gasoline stations along state-run highways. Moreover, the four major players had to reduce their number of outlets with 25 by January 1, 2006. The explicit objective of these measures is to allow for entry and to enhance price competition between outlets. This paper empirically evaluates to what extent the auctions and the reduction obligation have succeeded in this. We use a new panel data set which contains detailed price information for almost all Dutch gasoline stations for the time period between October 2005-August 2007.
We find that prices at auctioned sites have on average decreased by 0.9% and that this decrease can be fully ascribed to price changes at those sites that change ownership. However, we show that the ultimate cause of these ownership transfers are not the auctions themselves but the reduction obligation.
We do not detect any effect on prices charged by surrounding highway and/or non highway stations.
Authors: Adriaan R. Soetevent (UvA, ENCORE and ACLE), Marco A. Haan (RuG and ENCORE), Pim Heijnen (UvA).