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Abstract
The presence of market power in fuel retailing has been a major concern in
Brazil, motivating antitrust investigations as well as economic research. However, lack of
appropriate data precludes the estimation of straight market power indicators, leaving the possibility of using price series to identify market power. The objective of this study is to identify the presence of
market power at the retail of fuel ethanol in cities of different sizes. The method adopted consists in verifying if price
increases and decreases are transmitted asymmetrically to consumers, assuming that more intense transmission of
price increases is related to the presence of market power. Monthly wholesale and retail price series of ethanol for
cities with different sizes located in São Paulo State, Brazil, were used. The results indicate the presence of market
power, since retailers were able to transmit price increases more rapidly and more intensively than price decreases for
most cities. Such results suggest that asymmetry in price transmission can be a useful analytical tool to investigate
market power and that antitrust authorities must observe the retail concentration and the behavior in the fuel
market in order to protect consumers.