Game Theory Applications in Competitive Pricing Strategy Among Petrol Stations in Port Harcourt

This study applies non-cooperative game theory to model pricing behaviour among petrol station operators in Port Harcourt, Rivers State, South South Nigeria, one of Nigeria's most heavily concentrated urban fuel retail markets. The deregulation of downstream petroleum pricing, accelerated by the removal of the petrol subsidy in May 2023, has introduced competitive pricing dynamics into a market that was previously characterised by regulated uniform prices, creating conditions amenable to game-theoretic analysis. The study formulates the pricing interaction among competing stations as a simultaneous-move normal form game and as a sequential Stackelberg leadership game, identifying Nash equilibrium price strategies under alternative assumptions about cost structures, demand elasticity, and station location relative to competitors. Primary data on daily pump prices, transaction volumes, and competitor monitoring practices are collected through structured interviews with 60 station managers across five local government areas of Port Harcourt, supplemented by mystery shopper observations of actual pump prices over a four-week period. Empirical evidence of price leadership behaviour is tested against the theoretical Stackelberg prediction. Results indicate that stations located near major traffic intersections exhibit systematic first-mover price-setting behaviour consistent with Stackelberg leadership, while stations in residential zones more closely approximate simultaneous Bertrand competition. Keywords: game theory, Nash equilibrium, pricing strategy, petrol stations, Port Harcourt