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How do Consumers Respond to Gasoline Price Cycles?

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  • David P. Byrne, Gordon W. Leslie, and Roger Ware

Abstract

This paper empirically studies how consumers respond to retail gasoline price cycles. Our analysis uses new station-level price data from local markets in Ontario, Canada, and a unique market-level measure of consumer responsiveness based on web traffic from gasoline price reporting websites. We first document how stations use coordinated pricing strategies that give rise to large daily changes in price levels and dispersion in cycling gasoline markets. We then show consumer responsiveness exhibits cycles that move with these price fluctuations. Through a series of tests we find that forward-looking stockpiling behavior by consumers plays a central role in generating these patterns.

Suggested Citation

  • David P. Byrne, Gordon W. Leslie, and Roger Ware, 2015. "How do Consumers Respond to Gasoline Price Cycles?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej36-1-05
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    References listed on IDEAS

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    Cited by:

    1. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2016. "Selling gasoline as a by-product: The impact of market structure on local prices," DICE Discussion Papers 240, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. repec:aen:journl:ej38-6-hauca is not listed on IDEAS
    3. Justus Haucap & Ulrich Heimeshoff & Manuel Siekmann, 2017. "Fuel Prices and Station Heterogeneity on Retail Gasoline Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    4. Demet Yilmazkuday & Hakan Yilmazkuday, 2016. "Understanding gasoline price dispersion," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 57(1), pages 223-252, July.
    5. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2015. "Price dispersion and station heterogeneity on German retail gasoline markets," DICE Discussion Papers 171, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    JEL classification:

    • F0 - International Economics - - General

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