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Retail price cycles and response asymmetry

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  • Andrew Eckert

Abstract

Weekly retail gasoline prices in Windsor, Ontario, from 1989 to 1994 appear to respond faster to wholesale price increases than to decreases, but exhibit a cyclic pattern inconsistent with a common explanation of response asymmetry. I reconcile these observations through a model of price cycles. Prices on the downward portion of the cycle appear insensitive to costs, compared with price increases, supporting the theory that price decreases result from battles over market share. This pattern resembles a faster response to cost increases than to decreases, and the conclusion that asymmetry indicates a role for competition policy may be inappropriate.

Suggested Citation

  • Andrew Eckert, 2002. "Retail price cycles and response asymmetry," Canadian Journal of Economics, Canadian Economics Association, vol. 35(1), pages 52-77, February.
    • Handle: RePEc:cje:issued:v:35:y:2002:i:1:p:52-77
    DOI: 10.1111/1540-5982.00120
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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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