What is the “right” geographic definition of relevant markets? We study how unexpected and exogenous increases in excise duties in petroleum products were passed-through to retail prices in the Athens region and examine how the degree of the pass-through varies across different geographic relevant markets. Using various definitions of the relevant geographic market, we find that the most appropriate model that fits the Athens region, is one of perfect competition. Contrary to expectations and previous arbitrary geographic market definitions, we deduct that gas stations in Athens compete fiercely and that the role for geographic differentiation is minimal.
(joint work with Christos Genakos)