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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)

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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://129.3.20.41/eps/io/papers/0512/0512005.pdf
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Publisher 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
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Handle: RePEc:wpa:wuwpio:0512005

Note: Type of Document - pdf; pages: 15
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Web page: http://129.3.20.41

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

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June. [Downloadable!] (restricted)
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  2. Severin Borenstein, 1991. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 354-369, Autumn. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
  4. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
    Other versions:
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This page was last updated on 2009-11-13.

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