PRICE-CAP REGULATION AND QUALITY

In this research we consider retail gasoline market in Ukraine focusing our attention on the quality efficiency performance of the industry in 2003 and 2004 periods. The following split is made due to the price-cap regulation – government regulation of the ceiling prices on gasoline at retail – that was established with Memorandum at the beginning of 2004. Specifically, we examine the gasoline quality change in 2004 (comparing to 2003) after price-cap regulation applying advance efficiency analysis methods including non-parametric Data Envelopment Analysis and Smooth Bootstrap. Based on data with gasoline quality factor it was found that we can not discard the possibility of a degradation in quality efficiency performance of retail gasoline industry under price-cap regulation after 2004. We also investigate efficiencies of the sub-group 2003 and sub-group 2004 of the period 2003-2004, and it turns out that conclusions do not change: we detect higher aggregate quality efficiency for 2003 than for 2004.