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.
JEL: H22, L1
Christos Genakos and Themistoklis Kampouris
16 February 2026 Paper Number POIDWP142
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