Ignácio Tavares de Araújo Júnior Professor Adjunto do Departamento de Economia /PPGE, UFPB

Transcription

1 Olgopolstc behavor of Brazlan Gas Statons Ignáco Tavares de Araújo Júnor Professor Adjunto do Departamento de Economa /PPGE, UFPB Alexandre Rands Barros Professor Adjunto do Departamento de Economa da UFPE/PIMES Tago Cavalcant Unversty Lecturer and Fellow of Churchll College, Faculty of Economcs, Unversty of Cambrdge, Unted Kngdom André Matos Magalhães Professor Adjunto do Departamento de Economa da UFPE/PIMES Lucano Menezes Bezerra Sampao Professor Adjunto do Departamento de Economa /PPGE, UFPB Resumo Este artgo propõe analsar a competção no mercado de combustíves (gasolna) no Brasl partndo da hpótese de que uma menor dspersão dos preços de combustíves dos postos de um muncípo, assocada à maor margem bruta dos mesmos, é ndíco de prátcas antcompettvas, sto é, de formação de cartés. Essa relação fo estudada tanto em nível naconal como em nível regonal. Comprovada esta relação, e dada à estrutura vertcal de contratos estabelecdos entre dstrbudores e revendedores de gasolna, nvestga-se detalhadamente, a relação entre a lucratvdade dos postos e suas característcas, entre elas: tpo de bandera; dados referentes à localzação (vas prncpas, com proxmdade de concorrentes, etc); e prestação de outros servços (lojas de convenênca). Os resultados ndcam que margens maores (lucros) estão assocadas a postos localzados próxmos a supermercados, com lojas de convenênca e estaconamentos. Margens menores foram encontradas para postos de bandera branca. Palavras-chave: gasolna, margem, dspersão de preços, cartel. Abstract The goal of ths paper s to examne the competton n the fuel market n Brazl based on the assumpton that the lower dsperson on fuels prces, together wth hgher gross margn, s evdence of ant-compettve practces,.e. formaton of cartels. Shown ths relatonshp, and gven the vertcal structure of contracts between wholesaler and retalers of gasolne, we nvestgate the relatonshp between the proftablty of gas statons and ther characterstcs, ncludng, among other varables, brand; locaton (f n large avenues, proxmty of compettors, etc.); provson of other servces (convenence stores, etc). The results showed that unbranded statons tend to present lower margns, proxmty to supermarkets, the exstence of convenence stores and parkng lot tend ncrease the margns. The results also showed that the prce dsperson s related to the dstance from the captal and the seller s densty. Key words: fuel market, prce dsperson, cartel. 1

2 1. Introducton In Brazl, even n the bg ctes, wth large number of compettors, gas staton owner and ther unons are frequent targets of nvestgatons of cartels practces. In the Secretarat of Economc Rghts (Secretara de Dreto Econômco - SDE), of the Mnstry of Justce, the reports of cartel behavor n the fuel retal market are responsble for a thrd of the total complans receved, wth current nqures of approxmately 130 processes of cartels practces by gas statons ( Snce 2006, SDE has ncorporated an economc methodology, developed by the SEAE (Secretara de Acompanhamento Econômco), to dentfy f there a cartel s actng n a specfc market, and takes a closer look only after observng: () the tme evoluton of the retal s margns at the county level; () the correlaton between the retal s margns and the varablty of the retal s prces; and () the correlaton between the county and state margns. Examples of such cartels are those of João Pessoa-Recfe and Londrna. In the frst case, n May of 2007, SDE, n cooperaton wth the SEAE, Federal Polce and Mnstéro Públco, deployed a jont operaton n these two ctes (João Pessoa and Recfe) to obtan evdences of cartel formaton n the retal fuel market. In August of 2007, t was Londrna s turn, wth the coordnated acton of the SDE, SEAE and State Law Enforcement makng t possble to collect evdence aganst the cartel actng n the regon. Another known example s the one Lajes (SC), the "Cartel of Lajes", whch t was characterzed by an organzaton formed by several gas statons actng to defraud the market through the settng of the fuels prces wth the ad, and coordnaton, of the SINDIPETRO/SC (Unon of the Retalng of Ol Dervatves). CADE ponts out ths case as emblematc, snce t confrms the mportance of the partnershp between the CADE and the Mnstéro Públco n defense of the economc order, already observed n other cases such as "Cartel of the gas staton of Floranópols" and "The gas staton s cartel of Belo Horzonte". The goal of ths paper s to exam the exstence of factors that would ndcate the use of ant-compettve practces n the Brazlan fuel (gasolne) market. In partcular, we are concerned wth the relatonshp between retal margns and prce dsperson and also, wth the mpact of unbranded retalers (those wthout an exclusve contract wth a specfc dstrbutor) and retal margns. A negatve relatonshp between retal margns and prce dsperson can be 2

3 an ndcaton of ant-compettve: staton would collude to reduce competton, set prces and ncrease margns. 1 Such behavor does not, however, guarantees the causalty of the dsperson on the proftablty. A nvestgaton n more detals of the proftablty by gas staton, wth ndvdual data on ts characterstcs, ncludng, varables on localzaton (man avenue, proxmty of compettors, etc.), exstence of other servces (convenence store, etc.), allows us to take a better look at the effect of the vertcal contracts on the profts, n same lne of that made Shepard (1993). 2 The remanng of ths paper s dvded four sectons. Secton 2, a revews some recent paper wrtten about the topc for the Brazlan market; secton 3 dsplays a descrpton of the vertcal contractual structure and ts effect on prces and profts n the gasolne market; secton 4 presents the data, the econometrc approach and the results; the fnal secton presents the man conclusons. 2. A quck revew of the lterature n Brazl Although a strong topc of among those who own a car a must pay for the fuel and among the regulatory authortes, studes on prce formaton and cartel behavor a qut rare n Brazl. 3 Marjotta-Mastro (2002), for nstance, analyzes the fuel market n the years of 1995 to The author concludes that, for the analyzed perod, the fuel sector stll operated under the protecton of the State, closely to what happened durng the 1990 s. At that tme, the government stll tended to absorb the external shocks, preventng those to reach the market. 4 Wth a dfferent approach, usng game theory, Pnto and Slva (2004) studed the role and behavor of unbranded gas statons (retalers wthout an exclusve contract wth a partcular dstrbutor) on the prces and quanttes of the fuel market. The authors elaborate a model that took under consderaton the relatonshp between the dstrbutors (upstream) and retaler (downstream). Ther man hypothess was the exstence of a partal vertcal ntegraton so that the branded gas statons were ntegrated wth dstrbutors, va contracts, whle the 1 Barron et al (2004) argues that the prces dsperson can be assocated wth the number of compettors n the gasolne market and the results of ts study suggested that the larger the densty of gas statons (number of compettors nsde of a certan area) the smaller must be the prces dsperson. 2 Shepard, consderng the vertcal ntegraton n the fuel market of the Unted States, suggests that the prces retal (of the gas statons) depend on the contractual form between refner and the staton, whch, n turn, s functon of the characterstcs of the gas statons. 3 One of the problems n ths lne of studes s the lack of recent and avalable data that would allow such studes. In the last years the some data have been made avalable by the Agênca Naconal do Petróleo (ANP), at ts webste: 4 Petrobrás stll plays a role smlar to that by controllng prces as the recent events have shown: nternatonal ol prce when up from US 60,00 to US$ 130,00 a barrel durng the frst half of 2008, but the wholesale prces, mostly determned by Petrobrás, dd not change durng ths perod n Brazl. 3

4 unbranded ones remaned not ntegrated. One of ther man conclusons was that the exstence of unbranded gas statons promotes, n equlbrum, lower optmal prces and larger fuel supply. Another nterestng contrbuton t s offered by of the paper by Nunes and Gomes (2005). In ther work, they analyzed the competton n the retal fuel market for the State of São Paulo. Ther basc hypothess s that a negatve relatonshp between prce dsperson wthn the ctes and retal s margns would mply the use of ant-compettve practces by the sector. 5 They found evdence of such relatonshp for São Paulo. The paper also uses a Logt Multnomal Model to verfy role unbranded gas staton on level and ts varablty of retal prce. Ther results suggested that the presence of these unbranded statons mpled more competton. They concluded that the smaller the partcpaton of unbranded gas staton ndcatng concentraton of gas staton related to some dstrbutor brand the smaller the varaton of the margns and prces and, thus, the greater s the ndcaton of ant-compettve practces. In the next secton we take a look at the relatonshp between dstrbutors and gas statons and ts possble effect on retal prce and margns. 3. Vertcal relaton n the retal gasolne market and ts possble effects Ths secton manly s based on the artcle by Shepard (1993) whch presents a vertcal structure n a retal market as characterzed by a prncpal-agent problem wth the manager of a gasolne staton, that sells gasolne to the fnal consumer, as the agent and the refner (or dstrbutor - such as Mobl or Shell, for example), offerng gasolne to the statons (as the prncpal). Shepard analyzes the effects of ths structure on the behavor of the managers and on the retal prces. The startng pont s the observaton that the gas staton n tself s a good where both parts, dstrbutors and managers (owner), can make some nvestment. The contract that rules the relatonshp between the prncpal and the agent specfes how the nvestment s dvded and how the gas staton s managed. In the general, the dstrbutor makes the ntal nvestment; t has the ntal control of the good, and desgns a contract. In the Unted States, the majorty of the statons are constructed by a dstrbutor who chooses the localzaton, the sales capacty, and the servces to be offered (for example, convenence store or car wash). From there, the dstrbutor elaborates the contract makng a take t or leave t type of offer for potentals managers. Gven the characterstcs mposed n the contract, and statons 5 In ths paper, we follow the same logc to look at the natonal and regonal markets. 4

5 characterstcs, the manager chooses the retal prce and the level of effort to maxmze ts proft. The fnal demand for the product of the staton (gasolne and other products and servces) s assumed to be ncreasng wth the qualty the decreasng and wth the prce. As the effort to run the staton s costly to the manager, n general, he/she does not choose the optmal level from the pont of vew of the dstrbutor, f he/she s not subjected to contractual restrcton that stmulates hm/her n such a way. The purpose of the vertcal contract s to nduce the manager to make the preferred choces, from the dstrbutors pont of vew, ether by the drect specfcaton of the product or through ncentves that algn ther nterests. 6 The contractual problem of the dstrbutor s complcated by the lmtatons of how the dowstream choces can be ncluded n the contract. The effort of the manager may not be subject to drect control because t s not observable. Shepard (1993) presents the three possble forms of contracts between refner (or dstrbutor) and gasolne statons for the Unted States: a) Company-owned, Company-operated. A staton run under ths type of contract s owned by the dstrbutor and the manager s an employee. All control placed on the manager s typcal of the employer-employee standard relatonshp. Ths s the only type of contract whch the dstrbutor s allowed to mpose the retal prce. b) Company-owned, Dealer-operated. In a contract lke ths the dstrbutor owns the staton and makes most of the nvestments, but the manager s self-employed. The dstrbutor establshes the wholesale prce and an annual rent. The type of rent vares wth the dstrbutor, but he wll try to establsh a tax that s proportonal to the net ncome that the staton can generate. The contracts can, for example, specfy schedule of operaton, defne that type of products and servces that can be sold, besdes gasolne, and stll requre that the manager spends a certan amount of tme at the staton. The typcal contract also specfes a mnmum volume of gasolne that the manager must acqure. c) Dealer-owned, Dealer-operated. In ths n case, the dstrbutor does not make any nvestment n the staton. The dstrbutor controls the wholesale prce, but he does not charge a rent or a tax. The decsons on qualty of the servce and the retal prce are exclusve of the manager. The only substantve restrcton to the behavor of the manager s wth respect to the 6 Brckley and Dark (1987) looked at the effect of montorng of costs and nvestments n reputaton n the decson by an upstream frm to operate a downstream frm as a franchse unt nstead of one of ther own. They found patterns consstent companes savng n montorng costs n unts wth dffcult access. Lafontane (1992) and Norton (1988) also had reported results suggestng that the montorng costs and moral hazard affect the choce between openng a new unt and usng a franchsee. 5

6 qualty of the product and the brand, f the dealer chooses to carry a brand. For nstance, managers cannot sell gasolne suppled by another refner n pumps dentfed wth the dstrbutor (for nstance, cannot sell Texaco on pumps dentfed as Shell). 7 If the dealer decdes to run an unbranded staton, he/she can by gasolne from any dstrbutor or refner he chooses. As n the case presented n b), these contracts frequently nclude a mnmum volume of gasolne to be acqured by the staton. Accordng to Serebrsky (2001), for the retal fuel market n Brazl, the two last forms are the most common ones. However, the Law nº 9478/1997 and the ANP (Agênca Naconal do Petróleo) decree nº 116/2000 whch deal wth the separaton, recently occurred, of the actvtes of dstrbuton and retal, forbds the refner and dstrbutor to act drectly as retalers, but allow them to own a staton, thus allowng the frst type of contract, wth the staton as a property of the dstrbutor but managed by a employee (a manager). The vertcal relatonshp descrbed above, and the types of contracts presented, can nduce dfferent effects on the behavor of the staton managers, whch can also affect the retal prces (prces to the consumer) and the staton profts. In prncple, the prces can be hgher or lower n the case of statons owned by the dstrbutors, but the requrement of mnmum amounts of gasolne acqured by statons defned by contracts of type b) and c) suggests that the prces, when there are volume restrctons, could be lower n statons owned by refners. Barron and Umbeck (1984) found evdence that a small sample of refner owned statons charged lower prces n relaton the statons managed by other contract forms. It s worth notng that the mposton of a mnmum volume of purchase n contracts between dstrbutor and dealer (ether type b or c above) mposes some lmts on the staton retal prces polces, but t s not a perfect substtute for the drect determnaton of the prces by the dstrbutor (that can occur n type a contract). The mposed volumes are, n general, determned for long perods of tme and they are not usually adjusted for varatons on demand or supply condtons. In ths sense, the mposed lmts must be low enough n order to guarantee that the statons wll able to satsfy them under a wde rage of stuatons, so that, t s not very lkely that these restrctons, by themselves, are capable of equatng the retal prces, and profts, of the statons run under the three types of contracts. In other words, the profts (margns) can dffer for the three types of contracts. 7 Ths s especally hard and costly to montor and t tends to happen frequently, at least n Brazl. 6

7 Perhaps, the man factor that nfluences the retal prces, and profts, of the gas statons s the dstrbutor wholesale prce. In a typcal franchse soluton, the dstrbutor could establsh the wholesale prce equal ts margnal cost and extract ncome from the staton through the annual rent. However, for the unbranded statons (whose contracts deal only wth the prce of the gasolne wth no franchse of annual fees) the dstrbutor could charge a non lnear wholesale prce that would have the same effect. Stll, dfferently of the annual fees, the wholesale prces can be frequently adjusted. Evdently, establshng a dfferent wholesale prce for each staton,.e., defnng thousands of non lnear schemes s suffcently costly and demands detaled nformaton on the statons. Summng up, f prces polces and volumes mpostons are suffcent nstruments to control the retal prce, consumer prces become not related the contractual form. If ths s not the case, prces n statons owned the dstrbutors, that s, branded statons, wll tend to be lower. However, ths advantage on prce can be compensated by effect stemmng from efforts appled by the statons managers. There are evdent dfferences among the three types of contracts descrbed above wth respect to drectly controllng the effort managers and provdng ncentves related to performance. The amount of effort controlled by the dstrbutors s hgher n the statons that they own than n those owned by the dealers. On the other hand, ncentves related to the performance, desgned to nduce more effort by the statons manager, work better for contracts of type b and c. To compensate for such fact, some dstrbutors nclude wage ncentves for the managers of the statons they own, ted to managers effort. The moral hazard problem here, typcal prncpal-agent of relatonshp, s how to verfy the manager s level of effort. Thus, dstrbutors tend to prefer contracts type b or c when mantanng a desrable level of effort by the manager s more dffcult and costly. When the manager efforts ncrease the demand for gasolne, statons wth contracts b or c are able to ncrease ther margns (dfference between retal and wholesale prce) over extra volume sold. Thus, the margns for the ndependent statons, branded or unbranded, tend to be hgher than the margns of the company-owned, company-operated statons, when t s dffcult to observe the effort level. Consderng the dfferences between the branded and unbranded, Lews (2006) notes that the unbranded statons are free to buy fuel from of any dstrbutor and would suffer lttle nfluence from the latter n the moment of establshng a retal prce and, consequently, defnng ts margns. Ths means that they could always bd for the lowest prce, regardless of a dstrbutor brand. As already ponted, Pnto and Slva (2004) model suggests that that the 7

8 exstence of unbranded gas statons promotes, n equlbrum, lower retal prces. Ths means that the fnal effect of unbranded staton over commercalzaton margns could be ether postve or negatve. They wll usually charge a lower retal prce, what would reduce ther margns, but they can bd for lower prces among dstrbutors, what would have a postve effect on ther margns. If one beleves, as t seems possble, that they have a lmted strength over the dstrbutor, the fnal result would be that the reductons on the retal prces would greater than the dscounts they could obtaned from the dstrbutor, and the margns for the branded statons would be smaller than that from the branded statons. 3.1 Gas staton characterstcs and retal prces Other characterstcs can play an mportant role n determnng the retal prce and margn, besdes the type of contract between the dstrbutor and gas statons. Lews (2006) ponts out that the prces charged by the gas statons, and consequently ts margns, may be related to the exstence of amentes (servces) n the staton, such as convenence store, free parkng lots and restaurants. Accordng to Lews, these amentes could make consumers wllng to pay more for the fuel. If ths s the case, one could expect that the profts derved from gasolne sales wll be lower for statons that do not offer complementary servces (statons could charge more for the gasolne n the presence of amentes than otherwse, and they would pay the same wholesale prce as the other ndependent staton). 8 Other characterstcs, such as localzaton of the staton n street of ntense movement and the presence of close compettors can also play a part n determnng statons prces. Next secton deals wth the emprcal work of ths paper. The man goal s to check for the ndcaton of ant-compettve behavor n the Brazlan gasolne retal market. 4. Econometrc approach and some ntal results The econometrc secton of ths paper s dvded n three basc parts: a) frst, usng aggregated data, we test for the exstence of a relatonshp between margns and ndustry concentraton; b) then, by lookng at data at the gas staton level, we try to dentfy whch are the man determnates of the margns, wth specal attenton to the presence and mportance of unbranded gas staton; c) Fnally, we look at some of the varables that affect prce dsperson. 4.1 Margns versus market concentraton 8 Another ssue that can nfluence profts of the Brazlan statons s related to the capacty n promotng rregulartes, such as the use adulterated gasolne and taxes evasons. Unbranded statons are not subjected to the same control level as the branded ones and present hgher propensty to act n such way. 8

9 Our frst step was to estmate an equaton of margn (defned as the dfference between the retal prce and wholesale prce dvded by the wholesale prce), usng as explanatory varable an ndcator of prce dsperson (coeffcent of varaton = standard devaton of the retal prce dvded by the average retal prce of gasolne) as shown by equaton (1): The basc dea here s that f the statons are behavng n an ant-compettve way,.e. n colluson, one should fnd a negatve relatonshp between margns and prce dsperson. The negatve sgn for n equaton (1) would mean that the margns would be hgher where the prce dsperson s lower. In ths scenaro agents would have a clear ncentve to collude (Nunes and Gomes, 2005). Equaton (1) was estmated usng a panel data on the average retal margn of gasolne and the dsperson of retal prce of gasolne of 555 Brazlan ctes, coverng the perod of January of 2007 to Aprl of These data were made avalable by the ANP. The varable Marg ndcates the margn of commercalzaton of the gasolne n cty n date t. The measure of dsperson s represented by CV, the coeffcent of varaton of the retal prce for the gasolne n cty and month t. Equaton (1) was estmated n logarthms. 9 Table 1 below reports the results of equaton (1). The results pont to a statstcally sgnfcant relaton between average margn wthn the ctes and prce dsperson of gasolne n local retal gasolne markets. The negatve sgnal of the estmated parameter suggests, clearly, that n ctes where there s lower dsperson n prces the gas statons practce a hgher margn. The same s also observed when the data are dsaggregated by regon. It s worth notng the smlarty among the estmated values for North, Northeast, Southeast and South regons. Table 1: Relatonshp between margns and coeffcent of varaton for gasolne panel data (Jan/2007 to Abrl/2008) Varable Brazl North Northeast Southeast South Center-West Prce * * * * * * dsperson (-31.55) (-9.13) (-17.47) (-19.39) (-12.99) (-12.45) N F PROB>F t statstcs n parenthess. * Sgnfcant at 5% ** sgnfcant at 10% 4.2 Margns determnants 9 The Hausman test ndcated that a fxed effect most s more approprate to the data. 9

10 We now try to look at the man determnants of the margns for gas staton, wth specal attenton the type of relatonshp between the gas staton and the dstrbutors (branded versus unbranded gas staton). As dscussed above, theory would predct that the unbranded gas statons would have ncentves to lower the prce and ncrease competton. As argued before (secton 3), ther fnal mpact on commercalzaton margns would be negatve,.e. unbranded staton would present lower margns. 10 However, as pont n secton 3 above, margns can also be assocated wth other factors. In lne wth of arguments of Shepard (1993) and Lews (2006), gasolne retal prces and, thus, ther margns, can be related wth locaton varables, exstence of amentes n the staton and the number of compettors. In addton, the operatonal costs, represented, for nstance, by the number of employees, could nfluence the defnton of the fnal prce. All these characterstcs are taken nto account n the analyss of ths secton. The data used to estmate equaton (1) does not allows us to capture all these elements that perhaps nfluence the retal prce. To take n to account the nfluence of gas staton heterogenety on the commercalzaton margns, one need to look at the behavor of the margns at the gas staton level. Here, we address ths ssue by usng a database that contans nformaton on statons located n 427 Brazlan ctes, for the year of The data contan nformaton on the type staton (branded or unbranded), locaton, servces offered, number of employees, among other characterstcs. 11 The way the secton s organzed s the followng: we start wth a basc equaton, equaton (2), and then we added other characterstcs that could nfluence the margns. The goal here s to verfy how robust the ntal results are to the presence of other mportant explanatory varables. Equatons (2) through (6) are gven by: Marg 1 UN 2FNC 3CV (2) Marg 1UN 2FNC 3CNC 4CNC 2 5LOC 6 1 CV (3) Marg 1UN 2FNC 3CNC1 4CNC 2 PL RST CV LOC 5 CNV 6 (4) 10 We could not clearly dfferentate between the three types of contracts descrbed n secton 3 (a, b and c), snce we do not have nformaton on how owns the staton. We only have nformaton on the fact that the staton s branded or unbranded. All the unbranded statons are of type c contract, but the branded ones could be of any of the three types. 11 These data were used to re-estmate equaton (1). The results were smlar to those presented at table 1 and are presented at the end of ths paper. 10

11 Marg 1UN 2FNC 3CNC1 4CNC 2 EST RST SHP SUP CV LOC 5 CNV 6 (5) Marg EST 7 1UN 2FNC 3CNC1 4CNC 2 5LOC 4 8RST 9SHP 10SUP RD j j CNV 6 CV (6) where Marg s the commercalzaton margn of gas staton ; UN s a dummy varable that ndcates f the staton s assocated to some major dstrbutor (equals to 1 f unbranded); FNC s the number of employees of staton ; CNC1 s the number of compettors wthn a 2km radus from staton ; CNC2 s a dummy varable that ndcates f t s possble to see other compettors from staton ; LOC s dummy that ndcates f the staton s located n a man avenue; CNV s a dummy varable equals to 1 f there s a convenence store at gas staton, PL s a dummy varable equals to 1 f there s a parkng lot at staton ; RST s a dummy for the presence of a restaurant at staton ; SHP ndcates f staton s close to a mall; SUP s a dummy that takes the value of 1 f the gas staton s close to a supermarket; RD are regonal dummes; and CV s the coeffcent of varaton for the retal prce of gasolne n a gven cty. Then, equatons (2) through (6) explore the relaton between the gas staton prce margns and ts characterstcs. The average coeffcent of varaton for the cty was added n every equaton as measured of local prce dsperson. The varables are all logarthms form. Table 2 reports the results. As mentoned above, equaton (2) s the basc set up. It consders the relatonshp between the margn and the fact that the staton s branded or unbranded. The results suggest that the unbranded gas statons present a margn, on average, 10% lower than the branded ones, as one would expect. The costs, represented here by the number of employees, do not seem to be relevant to explan the margns. Wth respect to the parameter of the varable of prce dsperson, t s statstcally sgnfcant and wth a value close to the one found equaton (1). In equaton (3), three varables were added: competton 1 (CNC1), Competton 2 (CNC2) and the varable Locaton (LOC). The results of equaton (3) corroborate the fndngs of equaton (2), showng that even takng nto account these new varables, the coeffcents for unbranded and the prce dsperson reman sgnfcant. Yet, t s possble to observe that the number of close compettors has a negatve effect on the margns. However, havng a compettor close enough so that consumers can easly see t does not seem to affect the 11

12 margns. The locaton dummy ndcates that gas staton located n man avenues present a 6.4% hgher margn than those located outsde of these corrdors. Equaton (4) allows us to analyze how the convenence stores, restaurants and parkng lots nfluences the margns of commercalzaton. The results show that gas statons wth convenence stores and parkng practce margns that are 7.1% and 4.2% superors to those that do not offer these type of servces. Restaurants, on other hand, do not seem to make any dfference for the margns. Fnally, t s worth notng the stablty of the results of the varables unbranded, competton, locaton and prce dsperson when compared wth the results of equaton (3). Equaton (5) adds varables that ndcate the proxmty to mall and/or commercal centers and supermarkets. The results show that gas statons close supermarkets have, on average, a margn 4.6% hgher than other statons. However, beng close to commercal center has a negatve effect on the margns (-5.6%). Table 2: Results of equatons (2) through (6) Varables Equaton (2) Equaton (3) Equaton (4) Equaton (5) Equaton (6) Unbranded * * * * * (-5.04) (-5.11) (-5.11) (-5.22) (-6.9) N o of employees Competton 1 (# of compettors) Competton 2 (Dummy) (0.15) (0.24) (0.001) (0.13) (-0.60) * * * * (-3.88) (-4.29) (-4.18) (-4.71) (-0.41) (-0.07) (0.07) (0.78) Locaton (man avenue) * * * * (3.19) (2.49) (2.63) (2.13) Convenence store * * * (2.49) (4.34) (2.63) Restaurant (1.51) (1.59) (0.001) Parkng log * * (2.25) (2.24) (0.5) Shoppng * (-3.16) (-1.57) Supermarket ** ** (1.95) (1.72) Northeast * (-11.41) Southeast * (-15.89) South * (-9.43) Center-West * (-8.61) Prce dsperson * * * * * 12

13 (-12.88) (-12.34) (-11.9) (-11.64) (-11.15) N F Prob > F t statstcs n parenthess. * Sgnfcant at 5% ** sgnfcant at 10% Fnally, n equaton (6), regonal dummes are added. The omtted regon was the North, where gas statons practce the hghest margns. One can observe from table 3 that the regonal dfferentals are sgnfcant for the margns. Controllng for regonal effect, also affects the remanng parameters. For nstance, the unbranded statons now present a margn that s 12.8% nferor to that of branded gas statons. The exstence of convenence store ncreases the margns n 4.1% aganst the 7.1% (wthout the regonal control). The effect of the prce dsperson on the margns also decreased wth the ncluson of regonal dummes, but t s stll consstent wth the one estmated n equaton (1). Takng a closer look at the regonal aspects of the relatonshp between the margns and characterstcs of the gas statons, equaton (6) was estmated for the fve Brazlan regons. Table 3 reports the results. As t can be observed by the F statstcs, t s not possble to reject the null hypothess that all the parameters are equal the zero for the model estmated for the North regon. Therefore, the results for ths regon wll not be analyzed. Lookng at the results for the other regons, t s possble to note that the presence of unbranded gas staton s mportant to reduce the margns, as t was observed for the whole sample. The mpacts of the unbranded gas statons are stronger n the South, 16.3%, followed by the Center-West, Northeast and Southeast. For ths last regon the unbranded staton tend to reduce the margns, on average, n 10.8%, n lne wth the results of the whole sample, and provdng a strong ndcaton that the of ths knd of frm do practce lower prces than ts compettors whch are assocated to some brand. Table 3: Margns equatons for the regons Varables North Northeast Southeast South Center-West Unbranded * * * * (1.08) (-3.18) (-3.48) (-6.1) (-2.43) Competton 1 (# of compettors) * * * (-1.18) (-2.5) (-2.75) (-2.67) (-0.25) Competton 2 (Dummy) (-0.92) (0.38) (1.03) (1.07) (-1.15) Locaton (man avenue) ** (1.15) (0.6) (0.64) (1.85) (1.36) Convenence store * (1.22) (1.06) (3.14) (-0.16) (-0.65) 13

14 Restaurant * (2.12) (-1.23) (-0.49) (1.39) (0.92) Parkng log * (-0.06) (0.17) (1.34) (-1.99) (0.79) Shoppng * ** (-0.96) (-0.03) (-0.24) (-1.98) (-2.09) Supermarket * ** * (2.31) (1.23) (-1.59) (1.85) (2.52) Prce dsperson ** * * * * (-1.71) (-4.27) (-7.93) (-5.82) (-2.41) N F Prob>F t statstcs n parenthess. * Sgnfcant at 5% ** sgnfcant at 10% Wth regard to the remanng varables, the larger the number of close compettors the smaller are the margns, probably also confrmng, n regonal level, the argument of Barron (2004) regardng the relaton between retal prce and densty of close compettors. In the Northeast, besdes brand and the number of compettors, only the prce dsperson s relevant to explan the margns. Only for the Southeast, the exstence of convenence store postvely affects the margns. In the South, a larger dversty of gas staton characterstcs, such as locaton, proxmty shoppng and supermarkets, s relevant to explan the margns. Fnally, as the results for prce dsperson ndcate, for all regons, the statons located n ctes wth smaller varaton n prces among retaler present hgher commercalzaton margns. 4.3 Determnants of prce dsperson The results present above clearly ponted to a relatonshp between margns and prce dsperson n the retal gasolne market. In ths last part of the paper we try to shed some lght on the determnants of prce dsperson. Barron (2004) nvestgates how the densty of gas staton affects the competton among them and, consequently, ther retal prces. On the other hand, the dffculty to nvestgate the possble cartels n the retal fuel market can stmulate the unfcaton of prces n a cty, reducng the prce dsperson. Below, the relatonshp between prce dsperson and the densty of gas statons (defned as the number of statons of the cty dvded by the area of the cty) s examned n equatons (7) and (8). The dstance to the state captal, where normally are located the headquarters of the agences whch nvestgate ths market s nclude n the analyss. One would expect that ctes that are more dstant to the captal wll present lower prce dsperson. Equatons (7) and (8) are gven by: 14

15 where DP s the densty of gas statons of cty, DIST s the dstance of cty to state captal and DR are regonal dummes. Table 4 presents the results of equatons (7) and (8). The number of gas statons by km 2 seems to postvely affect the coeffcent of varaton of the prce of gasolne. For an ncrease of 1% n the densty, the coeffcent of varaton ncreases, on average, 0.038%. As Baron (2004) ponts out, ths result s n accordance wth the tradtonal models of monopolstc competton, where a larger number of compettors mples n more dsperson n prces. The results suggest that the ctes away from the state captals are those where the dsperson n prces s smaller, reflectng, perhaps, the fact n these ctes, far from the regulatory agences, t s easer to mantan a cartel for longer perods, wth very low probablty of been dscovered by the authortes. Fnally, n the model wth regonal dummes, the elastcty of prce dsperson wth respect to dstance to the captal s no longer statstcally sgnfcant. Only the gas staton densty would explan the varablty of prces of the ctes. Moreover, the parameters for regonal dummes, wth excepton of the South, are not statstcally sgnfcant, ndcatng the nexstence of relevant regonal partculartes whch explan the prce dsperson n the retal fuel market n Brazl. Table 4: Results for equatons (7) e (8) Varable Equaton (7) Equaton (8) Gas staton densty ** (1.88) * (2.22) Dstance to state captal * (-2.21) (-1.50) Northeast (-1.44) Southeast (-1.54) South ** - (-1.86) Center-west (-1.10) N F-statstc Prob>F t statstcs n parenthess. * Sgnfcant at 5% ** sgnfcant at 10% 5. Fnal remarks The goal of ths paper was to nvestgate the exstence of ndcatons of collusve practces n the retal fuel market that could affect the resale prces and, consequently, the 15

16 commercalzaton margns of statons n Brazl. The results suggest that smaller the prce dsperson n the ctes, the hgher are the margns practced by the gas statons, a result that ndcates the exstence of ncentves of prces algnment among retals frm n ths market, gven the possble profts gans. Ths result was found usng two dstnct databases and usng technques of panel data and OLS. Even wth the ncluson of addtonal varables n the model, the estmated parameters dd not suffer sgnfcant changes, ndcatng the robustness of such result. Ths relatonshp kept ts sgnal and remaned sgnfcance when we controlled for statons characterstcs, such as the exstence of convenence store and locaton. Regardng the type of contract between the dstrbutor and staton, we found that the unbranded gas statons practce smaller margns. In the same way as observed for the results wth prce dsperson, the results for brand were robust to the addton of other gas staton characterstcs and regonal dummes. The fact of not presentng a exclusve relatonshp wth a specfc dstrbutor gves the unbranded statons more flexblty to look for the dstrbutor wth lower wholesale prce at the same tme that the they are free from possble pressures by the dstrbutors to establsh thers retal prces. In ths sense, the exstence of unbranded gas statons can stmulate competton, consequently, prevent the formaton of cartels. The results also showed that havng more statons wthn a specfc area ncreases competton, as one may suspect. However prce dsperson wthn one cty can be related to other varables, such as concentraton of gas staton under one brand of dstrbutor or number gas statons owned by a sngle group or frm. One possble next step n ths lne research s to nvestgate how such varables affect the prce dsperson and margns. References Ban, J. Economes of Escale, Concetraton and Entry. Amercan Economc Revw, v. 44, 15-39, Barron, J. M. e Umbeck, J. R. The Effects of Dfferent Contractual Arrangements: The Case of Retal Gasolne Markets. Journal of Law and Economcs, v. 27, , Barron, J.; Taylor, B. and Umbeck, J. 2004, Number of Sellers, Average Prces, and Prce Dsperson, Internatonal Journal of Industral Organzaton, 22, pp Borensten, S. Sellng Costs and Swtchng Costs: Explanng Retal Gasolne Margns. RAND Journal os Economcs, v. 22, , Brckley, J. A. e Dark, F. H. The Choce of Organzatonal Form: The Case of Franchsng. Journal of Fnancal Economcs, v. 18, ,

17 Demsetz, H. Industry Structure, Market Rvalry, and Publc Polcy. Journal of Law and Economcs, v. 16, 1-10, Demsetz, H. Two Systems of Belef about Monopoly. In. H. J. Goldschmdt et al. (eds.), Industral Concentraton: The New Learnng, Boston, Katz, M. L. Vertcal Contractual Relatons. In. R. Schmalensee and R. D. Wllng, eds., Handbook of Industral Organzaton, New York, Lafontane, F. Agency Theory and Franchsng: Some Emprcal Results. RAND Journal of Economcs, v. 23, , Lews, Matthew, Prce dsperson and competton wth dfferentated sellers. Journal of Industral Economcs, Norton, S. W. An Emprcal Look at Franchsng as an Organzatonal Form. Journal of Busness, v. 61, , Nunes, C. and Gomes, C. Aspectos Concorrêncas do Varejo de Combustível no Brasl. XXXIII Encontro Naconal de Economa (Anpec Naconal), Natal, Schmalensee, R. Colluson Versus Dfferental Effcency: Testng Alternatve Hypotheses. The Journal of Industral Economcs, v. 35, n. 4, , Schmalensee, R. Inter-Industry Studes os Structure and Performance. In. R. Schmalensee e R. D. Wllg (eds.), Handbook of Industral Organzaton, North-Holland, Amsterdam, Shepard, A. Contractual Form, Retal Prce, and Asset Characterstcs n Gasolne Retalng. The RAND Journal of Economcs, v. 24, 58-77, Trole, J. The Theory of Industral Organzaton. Cambrdge, Mass.: MIT Press,

18 Annex The dsaggregated data make t possble to compute the average commercalzaton margns and the coeffcent of varaton for the prces by cty. Thus, equaton (1) was reestmated usng these data. The results are presented on table A1 below. Table A1 : Relatonshp between margns and coeffcent of varaton for gasolne cross secton, 2003 Varable Brazl North Northeast Southeast South Center-West Prce * * * * ** dsperson (-4.66) (-0.70) (-2.77) (-2.09) (-2.96) (-1.80) N F PROB>F t statstcs n parenthess. * Sgnfcant at 5% ** sgnfcant at 10% The result of table A1 for Brazl are smlar to those presented n table 1 - wth the longtudnal data on margn and prce dsperson. However, n the regonal results, one can note sgnfcant dfferences among coeffcents. In the North, although estmated parameter presents the same sgn of that from equaton (1), t s no longer statstcally sgnfcant. The sample sze avalable for the regon (10 ctes) certanly leaves doubts the valdty of ths result. For the other regons, the sgns of the parameter remans the same and all estmated parameter are statstcally sgnfcant. However, dfferences n the magntudes of the parameters are observed, n partcular, for the Northeast. Despte of the dfferences n the sample sze and technques used to estmate the equatons, n the same way that n table 1, t s n the Center-West where f t s possble to observe the large elastcty of the margns wth respect to prce dsperson. 18