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Flex Cars and Competition in Fuel Retail Markets
The study finds that the penetration of flex-fuel vehicles increased competition among fuel stations, leading to a reduction in retail prices and margins for both ethanol and gasoline. The effect was more pronounced for ethanol. While the price correlation between the two fuels increased, the authors found no strong evidence that the price spread between gasoline and ethanol decreased as flex-fuel adoption grew. Structural estimation suggests that pass-through from costs to prices is approximately 0.5, consistent with oligopoly theory.
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Document type: Research paper
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