Research

Working Paper

When Wholesalers Join the Cartel: Measuring Overcharge and Pass-Through in Fuel Retail

Abstract: This study examines the effect of wholesaler participation on cartel outcomes. To do so, I construct a novel dataset containing information on eight cartel cases in the Brazilian fuel retail market, with firm-level microdata on retail prices, wholesale prices, and profit margins. I employ a two-step Matching Difference-in-Differences approach—first at the city level and then at the firm level—to estimate the Average Treatment Effect on the Treated (ATT) for each firm. These ATT estimates are then used to build a cross-sectional dataset to analyze the impact of wholesaler participation in cartel activity. The results reveal that wholesaler participation significantly increases both retail prices and profit margins, even though it also raises wholesale prices. The estimated pass-through rate is approximately 561\%, suggesting that gas stations not only pass the increase in input costs on to consumers, but also benefit from enhanced market power due to the involvement of wholesalers. These findings suggest fines should rise when collusion spans wholesalers as well as retailers.