Spatial Interaction Between Fuel Stations in the Hungarian Gasoline Market

Absztrakt (kivonat)

Several shocks have hit the Hungarian fuel market in recent years, particularly affecting small fuel brands, consequently influencing the market ecosystem and consumer well-being. To ensure a balanced functioning of the market, it is essential to understand how these small brands interact with other participants. This paper investigates how the small fuel brands with only a few stations spatially interact with other stations in the Hungarian 95-octane gasoline market. The paper reveals how the change in price level charged by competitors affects the price changes of the small station itself. Effects are separated by the type of competitor in the local market of a station, defined as a circular area. By gradually increasing the radius of the relevant local markets, it is shown how spatial dependence unfolds as a function of distance. In a similar setup, concentric rings are introduced instead of circular markets to mitigate the distortions of heterogeneous station network density. Overall, the prices charged by large premium brands have the highest and most persistent effect in distance, followed by large discount and other small stations. Spatially relevant large premium and large discount brands are located within a 10-kilometer radius area of the small brands, while relevant small brands are located no further than 5 kilometers from the respective small station. In these wide ranges, the level of interaction falls rapidly with distance. The results may be of interest to competition authorities in market definition and to urban planners deciding on new station locations.