Gasoline Price Differences: Taxes, Pollution Regulations, Mergers, Market Power, and Market Conditions
- Author(s): Chouinard, Hayley
- Perloff, Jeffrey M.
- et al.
Retail and wholesale gasoline prices vary over time and across geographic locations due to differences in government policies and other factors that affect demand, costs, and market power. We use a two-equation, reduced-form model to determine the relative importance of these various factors. An increase in the price of crude oil has been virtually the only major factor contributing to a general rise in prices over the last couple of decades. Tax variations and mergers contribute substantially more to geographic price differentials than do price discrimination, cost factors, or pollution controls.