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Do retail gasoline prices respond asymmetrically to cost shocks? The influence of Edgeworth Cycles

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  • Michael Noel
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    Abstract

    Asymmetric price cycles similar to Edgeworth Cycles are appearing in increasingly many retail gasoline markets in the United States and worldwide. The asymmetry in the cycles can give rise to a finding of asymmetric price responses to cost shocks (asymmetric passthrough). This article estimates asymmetric passthrough for the market of Toronto, which exhibits cycles, and decomposes it into two components-that part explainable by the cycles and that part driven by other unknown sources. Significant asymmetric passthrough is found, with increases passed through more quickly than decreases. A significant cause of the finding is the presence of the cycles themselves. Copyright (c) 2009, RAND..

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1756-2171.2009.00078.x
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    Bibliographic Info

    Article provided by RAND Corporation in its journal The RAND Journal of Economics.

    Volume (Year): 40 (2009)
    Issue (Month): 3 ()
    Pages: 582-595

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    Handle: RePEc:bla:randje:v:40:y:2009:i:3:p:582-595

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    Cited by:
    1. Constantin BELU, 2012. "Pricing Patterns And Implications For Competition Policy," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 10, pages 97-103, December.
    2. Seaton, Jonathan S. & Waterson, Michael, 2012. "Identifying and characterising price leadership in British supermarkets," The Warwick Economics Research Paper Series (TWERPS) 987, University of Warwick, Department of Economics.
    3. Balaguer, Jacint & Ripollés, Jordi, 2013. "Asymmetric fuel price responses under heterogeneity," MPRA Paper 52481, University Library of Munich, Germany.
    4. Perdiguero-García, Jordi, 2013. "Symmetric or asymmetric oil prices? A meta-analysis approach," Energy Policy, Elsevier, vol. 57(C), pages 389-397.
    5. Paul Zimmerman & John Yun & Christopher Taylor, 2013. "Edgeworth Price Cycles in Gasoline: Evidence from the United States," Review of Industrial Organization, Springer, vol. 42(3), pages 297-320, May.
    6. Riemer P. Faber, 2009. "Asymmetric Price Responses of Gasoline Stations: Evidence for Heterogeneity of Retailers," Tinbergen Institute Discussion Papers 09-106/1, Tinbergen Institute.
    7. Aggarwal, Raj & Akhigbe, Aigbe & Mohanty, Sunil K., 2012. "Oil price shocks and transportation firm asset prices," Energy Economics, Elsevier, vol. 34(5), pages 1370-1379.
    8. Sunil Mohanty & Aigbe Akhigbe & Tawfeek Al-Khyal & Turki Bugshan, 2013. "Oil and stock market activity when prices go up and down: the case of the oil and gas industry," Review of Quantitative Finance and Accounting, Springer, vol. 41(2), pages 253-272, August.

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