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Non-linearities in mark-up on costs

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

Abstract

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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1468.

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Date of creation: 21 Nov 2006
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Handle: RePEc:pra:mprapa:1468

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Keywords: Rockets and feathers; asymmetry; petroleum; SETAR;

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  1. Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
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  9. Awudu Abdulai, 2002. "Using threshold cointegration to estimate asymmetric price transmission in the Swiss pork market," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 679-687.
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