Whom to inform about prices? Evidence from the German gasoline market

Abstract

When is informing consumers about prices most effective at increasing competition? We combine a theoretical model of imperfect information with empirical evidence to show how the effect of informing consumers about prices depends on how well informed they are ex ante. Theoretically, an increase in consumer information decreases prices more the fewer ex ante informed consumers there are. Empirically, we study the introduction of mandatory price disclosure in the German fuel market separately for two fuel types that differ in how well informed consumers are ex ante. For each fuel type, we use a synthetic difference-in-differences design and the universe of station-level prices in Germany and France. In line with the theory, the decline in prices is stronger for the fuel type with fewer ex ante informed consumers. We also show that the magnitude of the treatment effect declines over time and is intensified by local follow-on information campaigns.

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