Deregulation and strategic complements: Japanese gasoline market

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Abstract

The purpose of this article is to provide an explanation for the success of deregulation implemented in the Japanese oil industry by investigating the economic norm in Japanese gasoline market, namely, how a firm expects its rivals to react when the firm changes its output decisions. Using the conjectural opponent's reaction, this article investigates whether the economic norm in Japanese gasoline market is strategic complements or strategic substitutes. It is found that the economic norm in the Japanese gasoline market over the period 1992 to 2003 is strategic complements, that is, 'Do it, since everyone else is doing it'. It is suggested that some of the fall in gasoline prices said to result from successful deregulation should really be attributed to the production expansion derived from this strategic complementarity.

Original languageEnglish
Pages (from-to)2185-2192
Number of pages8
JournalApplied Economics
Volume43
Issue number17
DOIs
Publication statusPublished - 2011 Jul

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ASJC Scopus subject areas

  • Economics and Econometrics

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