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Gasoline prices jump up on Mondays: An outcome of aggressive competition?

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  • Foros, Øystein
  • Steen, Frode

Abstract

This paper examines Norwegian gasoline pump prices using daily station-specific observations from March 2003 to March 2006. Whereas studies that have analyzed similar price cycles in other countries find support for the Edgeworth cycle theory (Maskin and Tirole, 1988), we demonstrate that Norwegian gasoline price cycles involve a form of coordinated behavior. We also show that gasoline prices follow a fixed weekly pattern, with prices increasing significantly every Monday at noon, and that gasoline companies appear to use the recommended price as a coordination device with a fixed link between the retail and recommended prices. Moreover, the weekly pattern changed in April 2004; whereas Thursday had been the high-price day, Monday now became the high-price day. The price–cost margin also increased significantly after the weekly pattern changed in April 2004.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6783.

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Date of creation: Apr 2008
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Handle: RePEc:cpr:ceprdp:6783

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Keywords: gasoline; intertemporal price discrimination; price coordination;

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References

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Citations

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Cited by:
  1. Noel, Michael D., 2012. "Edgeworth Price Cycles and intertemporal price discrimination," Energy Economics, Elsevier, vol. 34(4), pages 942-954.
  2. Foros, Øystein & Steen, Frode, 2009. "Gasoline prices jump up on Mondays: An outcome of aggressive competition?," Discussion Papers 2009/2, Department of Business and Management Science, Norwegian School of Economics.
  3. Riemer P. Faber & Maarten C.W. Janssen, 2008. "On the Effects of Suggested Prices in Gasoline Markets," Tinbergen Institute Discussion Papers 08-116/1, Tinbergen Institute.
  4. Miguel A. Fonseca & Hans-Theo Normann, 2013. "Excess Capacity and Pricing in Bertrand-Edgeworth Markets: Experimental Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(2), pages 199-228, June.
  5. Anderson, Edward, 2011. "A new model for cycles in retail petrol prices," European Journal of Operational Research, Elsevier, vol. 210(2), pages 436-447, April.

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