UC Irvine

I study the effect of specialty credit cards and independent stations on competition in the Korean gasoline market. Chapter 1 shows how discounts from specialty credit cards work as artificial switching costs and help firms to increase price through splitting customers according to each brand in the industry. The empirical results from the Korean gasoline market in chapter 2 show that gasoline price increased after the introduction of brand-specific gasoline-discount credit cards and decreased after a partial replacement of the cards by all-around discount cards. This would harm customers without the credit cards and offset the discounts from specialty credit cards. Chapter 3 shows that independent stations set lower prices than nearby stations which in turn leads the nearby stations to lower their prices. The "rockets and feathers" effect is reversed among independent stations but is stronger among refiner operated stations. This supports the tacit collusion theory as a source of the phenomenon.