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Price-Response Asymmetry In Domestic Wholesale And Retail Diesel 2 Markets In Peru

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Author Info

  • Arturo Vasquez Cordano

    (OSINERG)

Abstract

This paper tests and confirms the hypothesis that retail and wholesale Diesel 2 prices respond more quickly to increases than to decreases in wholesale and crude oil prices, respectively. Among the possible sources of this asymmetry, we find: production / inventory adjustment lags, refining adjustments, market power of some sellers, searching costs, among others. By analyzing price transmission at different points of the distribution chain, this paper attempts to shed light on these theories for the Peruvian oil industry. Wholesale prices for Diesel 2 show asymmetry in responding to crude oil price changes, which may refl ect inventory adjustment effects. Asymmetry also appears in the response that retail prices give to wholesale price changes, presumably indicating short-run local market power among retailers or the existence of searching costs.

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File URL: http://128.118.178.162/eps/io/papers/0512/0512005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0512005.

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Length: 15 pages
Date of creation: 11 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0512005

Note: Type of Document - pdf; pages: 15
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Web page: http://128.118.178.162

Related research

Keywords: Price-response asymmetry; oil; Diesel 2 prices; impulse response analysis;

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References

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  1. 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.
  2. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
  3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  4. Nathan S. Balke & Stephen P. A. Brown & Mine Yücel, 1998. "Crude oil and gasoline prices: an asymmetric relationship?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 2-11.
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Cited by:
  1. Perdiguero-García, Jordi, 2013. "Symmetric or asymmetric oil prices? A meta-analysis approach," Energy Policy, Elsevier, vol. 57(C), pages 389-397.

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