VOLUME XXII
WINTER 2014

MARKET POWER IN THE RETAIL INDUSTRY OF NATURAL GAS FOR VEHICLES
 
JOHN J. GARCÍA
HERMILSON VELÁSQUEZ

Universidad EAFIT
CARLOS MAURICIO MONTENEGRO
Empresas Públicas de Medellín
 
The gas distribution system for natural gas vehicles (NGV) in Colombia is highly concentrated, which gives the retail distributors market power. The pricing mechanism appears to approximate a Bertrand type of oligopolistic model, with a dominant firm setting the prices. An analysis using a Lerner index indicates that the market structure provides markup benefits of about 40%. An econometric analysis of the determinants of prices using panel data indicates that variables other than costs affect the retail price of natural gas provided to NGV.
 
Key words: Natural Gas Vehicle, mark-up of benefits, market power, retail market.
JEL Classification: D43, C23.

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