An analysis for monopoly premium and consumer welfare in the gasoline market of China: Results from a multi-agent model

Abstract

Since 1998, the pricing mechanism of China refined oil market has reformed four times. Market pricing will be the future trend. This paper uses the method of agent-based computational economics to construct a free gasoline market model. By simulations of the gasoline market at different levels of crude oil price, a quadratic equation which can describe the survival rate of consumers is obtained. Based on a dummy variable model, we find that when the decisions of consumers are constrained by their income, the margin impacts of crude oil price, income and rigid demand on consumer welfares become smaller.