Pipes, Trains and Automobiles: Explaining British Columbia’s High Wholesale Gasoline Prices
修改古诺寡头垄断模型，研究管道运力约束如何导致加拿大不列颠哥伦比亚省批发汽油价格飙升，对理解区域间套利和不完全竞争市场有参考价值。
I modify a coumot oligopoly model to examine the effect of pipeline capacity constraints on regional wholesale gasoline prices. The model includes a discontinuous supply function for a common input (transportation) with a constrained low-cost mode (pipelines) and an unconstrained higher cost mode (rail, truck or barge). The equilibrium outcome demonstrates a piecewise linear relationship between the low-cost capacity constraint and the equilibrium price. The shape of the transportation supply curve is also shown to affect the relationship between firm average marginal costs and the equilibrium price. I also present a test of the model’s implications, demonstrating that it is able to explain a recent pronounced increase in wholesale gasoline prices for cities in British Columbia Canada. While the exercise is motivated by a specific market, the model and its implications apply to a broad set of discussions on inter-regional arbitrage in the context of imperfect competition.