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On the Effects of Suggested Prices in Gasoline Markets

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  • Riemer P. Faber

    ()
    (Erasmus School of Economics, Erasmus University Rotterdam)

  • Maarten C.W. Janssen

    ()
    (University of Vienna, and Erasmus School of Economics, Erasmus University Rotterdam)

Abstract

This article analyzes the role of suggested prices in the Dutch retail market for gasoline. Suggested prices are announced by large oil companies with the suggestion that retailers follow them. There are at least two competing rationales for the existence of suggested prices: they may either help retailers translate changes in international gasoline spot market prices into retail prices, or they may coordinate retail prices. We show that there is, next to the international spot market prices, additional information in suggested prices that explains retail prices. Therefore, we conclude that suggested prices help to coordinate retail prices.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-116/1.

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Date of creation: 01 Dec 2008
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Handle: RePEc:dgr:uvatin:20080116

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Web page: http://www.tinbergen.nl

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Keywords: gasoline markets; collusion; price setting; suggested prices;

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  1. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
  2. Severin Borenstein & A. Colin Cameron, 1992. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," NBER Working Papers 4138, National Bureau of Economic Research, Inc.
  3. 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.
  4. L. Bettendorf & S. A. van der Geest & G. H. Kuper, 2009. "Do daily retail gasoline prices adjust asymmetrically?," Journal of Applied Statistics, Taylor & Francis Journals, vol. 36(4), pages 385-397.
  5. 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.
  6. Christopher R. Knittel & Victor Stango, 2001. "Price ceilings as focal points for tacit collusion: evidence from credit cards," Working Paper Series WP-01-12, Federal Reserve Bank of Chicago.
  7. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
  8. Bettendorf, Leon & van der Geest, Stephanie A. & Varkevisser, Marco, 2003. "Price asymmetry in the Dutch retail gasoline market," Energy Economics, Elsevier, vol. 25(6), pages 669-689, November.
  9. Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, vol. 7(3), pages 281-312, September.
  10. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
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