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On the Effects of Suggested Prices in Gasoline Markets

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  • Riemer P. Faber
  • Maarten C. W. Janssen

Abstract

There is a widespread suspicion that suggested prices act as a focal point for individual firms when setting their prices. Oil companies announce suggested prices for gasoline stations in the Dutch retail market. We show that, compared to the gasoline spot market price, suggested prices contain additional information that explains retail price changes. We conclude that suggested prices have a horizontal coordinating effect in the sense that retail prices react to information that suggested prices contain and that is unrelated to firms’ costs (i.e., the information that firms use under normal competitive conditions).

Suggested Citation

  • Riemer P. Faber & Maarten C. W. Janssen, 2019. "On the Effects of Suggested Prices in Gasoline Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 676-705, April.
    • Handle: RePEc:bla:scandj:v:121:y:2019:i:2:p:676-705
    DOI: 10.1111/sjoe.12289
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    Cited by:

    1. Erwan Gautier & Magali Marx & Paul Vertier, 2023. "How Do Gasoline Prices Respond to a Cost Shock?," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(4), pages 707-741.
    2. Sylwester Bejger, 2019. "Wholesale fuel price adjustment in Poland: examination of competi-tive performance," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 18(4), pages 385-412, December.
    3. Janssen, Maarten & Reshidi, Edona, 2022. "Regulating recommended retail prices," International Journal of Industrial Organization, Elsevier, vol. 85(C).

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