Until the end of 2007, more than 99% of retail gasoline stations are offull-service type in Korea. After a gasoline price hike in mid-2008, however,the proportion of self-service stations increased gradually to attract pricesensitive consumers amid soaring gas prices. Using a difference-in-differencesapproach with a panel of station-specific prices, we examine the effect of newself-service stations on the price of their competing stations. Controlling forstation-level characteristics that could affect retail gasoline price, we find thatthe entry of self-service stations in the Korean retail gasoline market isassociated with a sizable price drop, 12 won per liter or 4 cents per gallon, attheir competing stations. Our empirical results suggest that consumers arewilling to search for lower gasoline prices in making their gasolineconsumption decision, and therefore policies to promote new entries of gasstations with lower prices could bring down retail gasoline prices.