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| Author: | Chakravorty, U. Nauges, C. Thomas, A. |
| Title: | Clean air regulation and heterogeneity in US gasoline prices |
| Journal: | Journal of Environmental Economics and Management
2008 : JAN, VOL. 55:1, p. 106-122 |
| Index terms: | environmental policy fuel market structure product differentiation regulations |
| Language: | eng |
| Abstract: | The US Clean Air Act introduced a number of federal regulations on gasoline, leading to a proliferation of fuel blends known as "boutique fuels". The impacts of this program on wholesale gasoline prices are analyzed in this paper. Using a novel methodological approach that applies regulatory distance measure as a proxy for measuring market power arising from product differentiation, the Clean Air regulation is found to increase gasoline prices. The price changes are due to the increases in the cost of refining and the increases of firms' market power. The OLS techniques are revealed to systematically underestimate the impact of regulation on gasoline prices. |
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