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Non-linearities in mark-up on costs

Author

Listed:
  • Wlazlowski, Szymon
  • Binner, Jane
  • Giulietti, Monica
  • Joseph, Nathan

Abstract

This study employs an error-correction SETAR model to analyse the non-linearities in the behaviour of the mark-up on costs charged by the filling stations in the New York metropolitan area. While usual price transmission gained significant attention in the literature, the mark-up portion of the price has not been analysed to date. The results indicate that the adjustment to mark-ups to their long run values is non-linear, but the speeds with they adjust to their long-run values are equal across regimes for two out of three series analysed. For one of the series the adjustment is beneficial for the end consumers such that prices fall faster than they rise. The findings are somewhat surprising, indicating that there is no need for government intervention in the NY petroleum market.

Suggested Citation

  • Wlazlowski, Szymon & Binner, Jane & Giulietti, Monica & Joseph, Nathan, 2006. "Non-linearities in mark-up on costs," MPRA Paper 1468, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1468
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    References listed on IDEAS

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    More about this item

    Keywords

    Rockets and feathers; asymmetry; petroleum; SETAR;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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