The determinants of margins in French retail gasoline markets

Abstract

When studying oligopolies, a tension exists between models supporting tacit collusion and those supporting the noncollusive behaviour of firms. Using a panel on retail fuel margins in France over more than 20 years, we find mitigated evidence of collusive behaviour in the retail gasoline industry. On the one hand, we find lower margins when demand is expected to increase in the next period, which is a standard prediction for the noncooperative models. On the other hand, we also find evidence of tacit collusion as margins respond to input cost changes in the manner that the tacit collusion models predict: margins decline when the expected marginal cost increases. Our results leave open the question of collusion in the retail gasoline market.