Advanced Search
MyIDEAS: Login to save this article or follow this journal

On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

Contents:

Author Info

  • Holmes, Mark J.
  • Otero, Jesús
  • Panagiotidis, Theodore

Abstract

This paper employs a pair-wise approach to examine regional integration in the US gasoline market. Using gasoline price data at the state level over a period of more than two decades, we find strong support for the view that the law of one price holds in regional markets, as more than 80% of bivariate price differentials turn out to be stationary. Furthermore, we uncover evidence that the speed at which prices converge to the long-run equilibrium depends upon the distance between states. Asymmetries are also present in this relationship. Our findings suggest that the more similar are states with respect to taxation, gas stations and refining capacity, the faster is the speed of adjustment towards the long-run equilibrium.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0140988312002575
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 36 (2013)
Issue (Month): C ()
Pages: 503-510

as in new window
Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:503-510

Contact details of provider:
Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Panel data; Pair-wise approach; Market integration; Gasoline; Speed of adjustment;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of the Augmented Dickey-Fuller Test," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 13(3), pages 277-80, July.
  2. Kendix, Michael & Walls, W.D., 2010. "Estimating the impact of refinery outages on petroleum product prices," Energy Economics, Elsevier, Elsevier, vol. 32(6), pages 1291-1298, November.
  3. Brown, Jennifer & Hastings, Justine & Mansur, Erin T. & Villas-Boas, Sofia B, 2006. "Reformulating competition? Gasoline content regulation and wholesale gasoline prices," CUDARE Working Paper Series 1010R, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy, revised Jan 2007.
  4. Chouinard, Hayley & Perloff, Jeffrey M, 2002. "Gasoline price differences: taxes, pollution regulations, mergers, market power, and market conditions," CUDARE Working Paper Series 951, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  5. Yazgan, M. Ege & Yilmazkuday, Hakan, 2011. "Price-level convergence: New evidence from U.S. cities," Economics Letters, Elsevier, vol. 110(2), pages 76-78, February.
  6. Axel Dreher & Tim Krieger, 2005. "Do gasoline prices converge in a unified Europe with non-harmonized tax rates?," KOF Working papers 05-114, KOF Swiss Economic Institute, ETH Zurich.
  7. Myriam Nourry, 2009. "Re-Examining the Empirical Evidence for Stochastic Convergence of Two Air Pollutants with a Pair-Wise Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 44(4), pages 555-570, December.
  8. C. Simon Fan & Xiangdong Wei, 2006. "The Law of One Price: Evidence from the Transitional Economy of China," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 682-697, November.
  9. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  10. Fischer, Christoph, 2009. "Price convergence in the EMU? Evidence from micro data," Discussion Paper Series 1: Economic Studies 2009,06, Deutsche Bundesbank, Research Centre.
  11. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(1), pages 305-39, February.
  12. Stigler, George J & Sherwin, Robert A, 1985. "The Extent of the Market," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 555-85, October.
  13. Lance J. Bachmeier & James M. Griffin, 2003. "New Evidence on Asymmetric Gasoline Price Responses," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 772-776, August.
  14. James Alm & Edward Sennoga & Mark Skidmore, 2009. "Perfect Competition, Urbanization, And Tax Incidence In The Retail Gasoline Market," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 118-134, 01.
  15. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  16. Paul F. Byrne, 2010. "Geographic Competition in the Retail Gasoline Market: Who are a gas station's competitors?," The Journal of Economics, Missouri Valley Economic Association, Missouri Valley Economic Association, vol. 36(2), pages 75-97.
  17. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, 9.
  18. Marion, Justin & Muehlegger, Erich, 2011. "Fuel tax incidence and supply conditions," Journal of Public Economics, Elsevier, vol. 95(9), pages 1202-1212.
  19. Pesaran, M. Hashem, 2004. "A Pair-Wise Approach to Testing for Output and Growth Convergence," IZA Discussion Papers 1313, Institute for the Study of Labor (IZA).
  20. Nodir Adilov & Hedayeh Samavati, 2009. "Pump Prices and Oil Prices: A Tale of Two Directions," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 37(1), pages 51-64, March.
  21. M. Hashem Pesaran & Ron Smith & Takashi Yamagata & Lyudmyla Hvozdyk, 2009. "Pairwise Tests of Purchasing Power Parity," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 28(6), pages 495-521.
  22. Jeremy A. Verlinda, 2008. "DO ROCKETS RISE FASTER AND FEATHERS FALL SLOWER IN AN ATMOSPHERE OF LOCAL MARKET POWER? EVIDENCE FROM THE RETAIL GASOLINE MARKET -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 581-612, 09.
  23. Ganesh Iyer & P. Seetharaman, 2008. "Too close to be similar: Product and price competition in retail gasoline markets," Quantitative Marketing and Economics, Springer, vol. 6(3), pages 205-234, September.
  24. Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of a Modified Dickey-Fuller Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 411-19, August.
  25. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 33-50, January.
  26. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  27. Rodney Paul & Dragan Miljkovic & Viju Ipe, 2001. "Market integration in US gasoline markets," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(10), pages 1335-1340.
  28. Thomas Garrett & Gary Wagner & David Wheelock, 2007. "Regional disparities in the spatial correlation of state income growth, 1977–2002," The Annals of Regional Science, Springer, Springer, vol. 41(3), pages 601-618, September.
  29. Suvankulov, Farrukh & Lau, Marco Chi Keung & Ogucu, Fatma, 2012. "Price regulation and relative price convergence: Evidence from the retail gasoline market in Canada," Energy Policy, Elsevier, vol. 40(C), pages 325-334.
  30. John Cuddington & Zhongmin Wang, 2006. "Assessing the Degree of Spot Market Integration for U.S. Natural Gas: Evidence from Daily Price Data," Journal of Regulatory Economics, Springer, vol. 29(2), pages 195-210, 03.
  31. George Deltas, 2008. "RETAIL GASOLINE PRICE DYNAMICS AND LOCAL MARKET POWER -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 613-628, 09.
  32. Parsley, David C & Wei, Shang-Jin, 1996. "Convergence to the Law of One Price without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(4), pages 1211-36, November.
  33. Matthew S. Lewis, 2009. "Temporary Wholesale Gasoline Price Spikes Have Long-Lasting Retail Effects: The Aftermath of Hurricane Rita," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 581-605, 08.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:503-510. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.