Economics Seminar Series 2026/2027

Speaker: Andrea Pozzi

Title: Unbranded competition

Abstract: We study how economic downturns affect firms’ incentives to supply low-price, low-quality alternatives. We use brand status as a quality proxy and examine the Italian retail gasoline industry, where the share of unbranded stations has risen rapidly amid weak economic performance. We estimate a structural model of quality choice with price competition between branded and unbranded stations. Consumers value branded gasoline more highly, but their willingness to pay for branding is non-homothetic in income, so local income shocks affect dealers’ incentives on quality provision. Income declines substantially increase the probability that branded stations become unbranded. In markets gaining additional unbranded stations, endogenous quality adjustment lowers average gasoline prices and yields meaningful fuel savings for households. Almost all of the price decline comes from newly unbranded stations’ lower prices; branded-station prices change little. Economic distress thus expands the low-price segment and partly cushions consumers’ loss of purchasing power, but through greater market segmentation rather than intensified competition in the high-quality segment.