Network Centrality and Market Prices: Empirical Evidence

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.