An Empirical Investigation of the Determinants of Asymmetric Pricing
AbstractThis article empirically investigates the cause of asymmetric pricing: retail prices responding faster to cost increases than decreases. Using daily price data for over 11,000 retail gasoline stations, I nd that prices fall more slowly than they rise as a consequence of rms extracting informational rents from consumers with positive search costs. Premium gasoline prices are shown to fall more slowly than regular fuel prices but rise at the same pace, and this pricing pattern supports theories based upon competition with consumer search. Further testing also rejects focal price collusion as an important determinant of asymmetric pricing.
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Bibliographic InfoPaper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 201210.
Length: 29 pages
Date of creation: Nov 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-COM-2012-11-17 (Industrial Competition)
- NEP-ENE-2012-11-17 (Energy Economics)
- NEP-HME-2012-11-17 (Heterodox Microeconomics)
- NEP-MKT-2012-11-17 (Marketing)
- NEP-REG-2012-11-17 (Regulation)
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