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Asymmetric Price Responses of Gasoline Stations: Evidence for Heterogeneity of Retailers

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  • Riemer P. Faber

    (Erasmus University Rotterdam)

Abstract

This paper studies asymmetric price responses of individual firms, via daily retail prices of almost all gasoline stations in the Netherlands and suggested prices of the five largest oil companies over more than two years. I find that 38% of the stations respond asymmetrically to changes in the spot market price. Hence, asymmetric pricing is not a feature of the market as a whole, but of individual firms. For asymmetrically pricing stations, the asymmetry is substantial directly after a change but disappears after one or two days. I study station-specific characteristics and conclude that asymmetric pricing seems to be a phenomenon that is randomly distributed across stations. I also find that none of the five largest oil companies adjust their suggested prices asymmetrically.

Suggested Citation

  • Riemer P. Faber, 2009. "Asymmetric Price Responses of Gasoline Stations: Evidence for Heterogeneity of Retailers," Tinbergen Institute Discussion Papers 09-106/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20090106
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    References listed on IDEAS

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    Cited by:

    1. Michael L. Polemis & Mike G. Tsionas, 2017. "Asymmetric Price Adjustment in the US Gasoline Industry: Evidence from Bayesian Threshold Dynamic Panel Data Models," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(1), pages 91-128, January.
    2. Leonardo Cardoso & Mauricio Bittencourt & Elena Irwin, 2016. "Price asymmetry and retailers heterogeneity in Brazilian gas stations," ERSA conference papers ersa16p796, European Regional Science Association.
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    4. Polemis, Michail & Fotis, Panagiotis, 2011. "The gasoline Industry in European Union and the USA," MPRA Paper 35097, University Library of Munich, Germany.

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    More about this item

    Keywords

    price setting; asymmetric price responses; gasoline markets;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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