Testing a Spatial Interacting-Markets Hypothesis

Abstract

Two models for competitive spatial pricing between retail outlets in a single urban area are presented. The models are distinguished in terms of first, their relationships to underlying supply and demand conditions in the market and second, the spatial forms of inter-site competition described. Properties of the models are identified. The statistical theory appropriate to these models is reviewed and the models then fitted to data for retail gasoline prices during periods of falling and then rising average price levels.