Abstract
Abstract In 2011, price peaks in retail gasoline prices caused public outrage and attracted the attention of German regulatory agencies. After having examined the market, competition authorities concluded that tacit collusion existed but could not easily be prosecuted under given competition law. In several other countries, various types of regulatory schemes are implemented to tackle tacit collusive behavior, e.g., there are price ceilings established in Luxembourg or per day limits of price increases given in Austria. However, research has found that none of them has led to satisfactory results. Hence, the following paper proposes a different regulatory approach, i.e., the implementation of corrective taxes. Results show that a specially tailored tax on price successfully manages to render collusion an unprofitable business by collecting marginal profits and that the inherent vice of the gasoline retail market, i.e., the transparency that enables tacit—and therefore non-prosecutable—collusion, could be turned into a regulatory virtue as it becomes a powerful means to help successfully tackle imperfect competition and to bring about a more efficient market outcome.
Highlights
In today’s globalized economy, mobility is a crucial aspect of most people’s everyday lives on both a professional and personal level
Findings show that the supply side of the German gasoline retail market is comprised of an oligopoly that consists of five major companies—Aral, Esso, Jet, Shell, Total—and a negligible competitive fringe (Bundeskartellamt 2011)
Even Danielsen (1979) does not question the concept of successfully skimming a cartel’s profits through implementing an ad valorem regulatory tax scheme (Adelman 1979) in the course of his critical comment on Adelman’s paper. He mainly questions whether all nations in demand of OPEC supply could uniformly consent to implementing such a tax policy. This problem certainly does not arise in case of the gasoline retail market as the regulatory policy proposed in Section 2 deals with a cartel comprised of companies instead of sovereign nations such as OPEC
Summary
In today’s globalized economy, mobility is a crucial aspect of most people’s everyday lives on both a professional and personal level. These findings are certainly in line with standard economic theory which states that heterogeneous agent models render different results than a standard homogeneous agent models (Kirman 2006) Another important aspect that was identified by Pock (2010) with respect to estimating gasoline demand in Europe is that of an increase in diesel car usage. Several countries have taken different regulatory measures in order to fight this economically undesirable status quo It appears as though none of these measures have proven successful (Berninghaus et al 2012, Haucap and Mueller 2012), i.e. neither have markets become significantly more competitive and less collusive nor has asymmetric price volatility been abolished (Polemis and Panagiotis 2013, Bettendorf et al 2003).
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