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Competition Buzz: Empirical Evidence of Market Power in Natural Gas Vehicle Minority Industries

 |  October 25, 2016

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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