Price Regulation and Fraud—with Special Emphasis on Gasoline Retailing

In this paper, we study fraud and price regulation in gasoline retailing: We model the incentives that retail stations have to dispense less gasoline than the amount that consumers pay for: both under fixed and flexible price regimes. The results of the model indicate that competition, cheating fine...

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Bibliographic Details
Published in:Review of industrial organization 2022-03, Vol.60 (2), p.175-192
Main Authors: Arteaga, Julio César, Flores, Daniel
Format: Article
Language:English
Subjects:
Ambiguity
Cheating
Consumer protection
Consumers
Economics
Economics and Finance
Fraud
Gasoline
Gasoline prices
Incentives
Industrial Organization
Law enforcement
Liberalization
Microeconomics
Price ceilings
Price regulations
Prices
Regulation
Retail industry
Retail stores
Retailing
Service stations
Welfare
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Summary:In this paper, we study fraud and price regulation in gasoline retailing: We model the incentives that retail stations have to dispense less gasoline than the amount that consumers pay for: both under fixed and flexible price regimes. The results of the model indicate that competition, cheating fines, and law enforcement efforts reduce incentives to cheat regardless of the price regime. Interestingly, price-cap regulation itself creates additional incentives to cheat and reduces welfare. Nevertheless, its effect on consumers’ surplus is ambiguous.
ISSN:0889-938X
1573-7160
DOI:10.1007/s11151-021-09840-z