Economics and Finance Seminar: Simon Martin

Price caps and coordinated effects: Evidence from retail gasoline (joint with Frank Verboven)

Price caps aim to protect consumers but may also act as focal points for tacit coordination. We study the Belgian retail gasoline market and document pervasive price rigidity, widespread pricing at the caps, and bunching at integer discounts below the caps. We subsequently develop a general framework to identify the fraction of firms that coordinate on the price cap rather than being constrained by it. Applying this framework, we find that the caps constrain relatively few stations and mainly induce a large fraction of stations to coordinate on higher prices at or below the caps. Removing price caps would reduce profit margins by an amount comparable to that associated with the collapse of an explicit cartel.

Thursday, October 22, 2026, from 12:00 to 1:15 p.m.

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Room A406