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

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Author Info
Foros, Øystein
Steen, Frode

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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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Related research
Keywords: gasoline; intertemporal price discrimination; price coordination;

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Find related papers by JEL classification:
D40 - Microeconomics - - Market Structure and Pricing - - - General
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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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.:
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  2. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May. [Downloadable!] (restricted)
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    Other versions:
  6. Eckert, Andrew, 2003. "Retail price cycles and the presence of small firms," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 151-170, February. [Downloadable!] (restricted)
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    Other versions:
  12. Oystein Foros & Frode Steen, 2008. "Gasoline Prices Jump Up on Mondays: An Outcome of Aggressive Competition?," Working Papers 08-20, Centre for Competition Policy, University of East Anglia. [Downloadable!]
    Other versions:
  13. Andrea Shepard, 1993. "Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 58-77, Spring. [Downloadable!] (restricted)
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  17. 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, 05. [Downloadable!] (restricted)
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  25. Michael D. Noel, 2008. "Edgeworth Price Cycles and Focal Prices: Computational Dynamic Markov Equilibria," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 17(2), pages 345-377, 06. [Downloadable!] (restricted)
  26. Greg Shaffer, 1991. "Slotting Allowances and Resale Price Maintenance: A Comparison of Facilitating Practices," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 120-135, Spring. [Downloadable!] (restricted)
  27. Jullien, Bruno & Rey, Patrick, 2000. "Resale Price Maintenance and Collusion," IDEI Working Papers 102, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. 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. [Downloadable!]
  2. Foros, Øystein & Steen, Frode, 2009. "Gasoline prices jump up on Mondays: An outcome of aggressive competition?," Discussion Papers 2009/2, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
    Other versions:
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