By: John J. Garcia, Carlos Mauricio Montenegro & Ermilson Velasquez
The retail market of Natural Gas Vehicle – NGV in Colombia is highly concentrated. The gas stations in this sector can exercise market power. The pricing mechanism in this industry is similar to an oligopolistic model of a dominant firm, Bertrand, competition in prices. Using the Herfindahl Hirschman Index (HHI) we found a high level of concentration in the gas vehicle industry and analyzing the mark-up of benefits our results suggest that the firms take advantage of their market power. Finally, using a panel data exercise we identify the price determinants for this industry.
Full Content: SSRN
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