Game Theory Analysis of Price Competition Among Petrol Stations in Port Harcourt Metropolis

The deregulation of the downstream petroleum sector in Nigeria has intensified price competition among fuel retail outlets in urban centres, creating strategic pricing interactions that can be formally analysed using game theory. This study applies non-cooperative game theory, specifically Nash equilibrium analysis and the Bertrand duopoly model, to examine pricing strategies among petrol stations in Port Harcourt metropolis, Rivers State, South South Nigeria. Price data are collected weekly from 60 stations across six districts over a four-month period, supplemented by structured interviews with station managers on pricing decision rules and competitor monitoring practices. The strategic interaction between adjacent stations is modelled as a simultaneous-move pricing game with differentiated products. Nash equilibrium prices are computed under assumptions of complete and incomplete information about competitor costs. The empirical results reveal that 73 percent of observed price pairs across competing station pairs converge within 2 naira of the predicted Nash equilibrium values, validating the model's explanatory power. Collusive pricing equilibria are identified in three districts where station proximity and owner-network effects reduce competitive pressure. The study demonstrates that game-theoretic modelling offers a structured framework for understanding market behaviour in Nigeria's transitioning petroleum retail sector and has implications for competition policy enforcement. Keywords: game theory, Nash equilibrium, petrol station pricing, Port Harcourt, Bertrand model.