Network centrality and market prices: Empirical evidence

- We empirically investigate the importance of network centrality for pricing.
- Firms located closely to a local market center are more powerful in the pricing game.
- Centrality is more important in larger markets (as the number of firms increases).

We empirically investigate the importance of centrality (holding a central position in a spatial network) for strategic interaction in pricing for the Austrian retail gasoline market. Results from spatial autoregressive models suggest that the gasoline station located most closely to the market center-defined as the 1-median location-exerts the strongest effect on pricing decisions of other stations. We conclude that centrality influences firms' pricing behavior and further find that the importance of centrality increases with market size.