This paper examines the "right" geographic definition of relevant markets by analyzing how excise tax pass-through varies with local competition in the retail gasoline market of a large metropolitan city. Using a natural experiment from three unanticipated and exogenous fuel tax hikes and detailed station-level price data, we show that average pass-through is invariant to the number of nearby competitors across various geographic definitions. This contrasts with theoretical predictions and prior island-based evidence, suggesting that the entire metropolitan area functions as a single market. Our findings challenge standard isodistance- or isochrone-based market delineations used in academic research and competition policy.

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29 January 2026

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International Journal of Industrial Organization 2026

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DOI: 10.1016/j.ijindorg.2026.103266

https://www.sciencedirect.com/science/article/pii/S0167718726000196

This Journal article is published under the centre's Growth programme.