Determinants of Retail Prices on Gasoline: Empirical Evidence for Saint Petersburg
We examine mechanisms of retail pricing for gasoline in Saint Petersburg in 2002-2013. Paper presents a theoretical and empirical analysis of gas station quality and location influence on retail prices. Empirics is based on a unique database of retail gasoline prices for particular gas station. Our main results are that gas station location (such as the number of competitors in the set radius, the distance to the next competitor, location on the way out of the city or vice versa, population density) has extremely weak impact in prices but price time-variance is mainly associated with response for oil price change specific for gas station brand. Cross sectional price variance is mainly explained by the brand identity as well as by the shadow price for the services additionally provided at the stations. As far as the brand identity is concerned, the price difference may reflect the cost difference as well as may be a signal of distinguishing product quality. Then, the price differentiation in response to the fact that the stations provide additional paid or free services is preserved even when the brand identity is taken into account. On the other hand, there is no evidence that the firms try do discriminate the consumers in case several stations of the same brand are located near each other. Additional econometric result of the paper is a numerical evaluated sensitivity of retail gasoline price to oil prices changes on the level of individual station brands.