Regulation, competition and fraud: evidence from retail gas stations in Mexico

Arteaga, Julio Cesar and Flores, Daniel (2010): Regulation, competition and fraud: evidence from retail gas stations in Mexico.

Abstract

Mexican gas stations across the country buy and sell gasoline at regulated common prices. Therefore, authorities that set these prices do not take into account competition conditions of each market. In this paper we establish the effect of a regulated mark-up price as well as competition on the incentives that gas stations in Mexico have to dispense less amount of gasoline than what consumers pay for. The results of theoretical and empirical work indicate that a higher regulated mark-up price reduces the incentives of gas stations to cheat. Similarly, more intense competition among the retailers of a given market decreases the average shortage.

• Item Type: MPRA Paper
• Language: English
• Keywords: gasoline pricing; regulation; competition; fraud
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law

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