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Station level gasoline demand in an Australian market with regular price cycles

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  • Zhongmin Wang

Abstract

Regular and frequent gasoline price cycles are being observed in many Australian and Canadian markets. What is driving these price cycles has been the subject of academic studies and government investigations. The existing explanations for these price cycles all rely on the presumption that drivers are intensively sensitive to gasoline price differentials at the station level. However, no empirical evidence exists in the literature to support this presumption. This paper provides the first piece of empirical evidence. This paper uses a unique price and quantity data set and novel instruments to estimate the station level gasoline demand in the cycling market of Perth, Australia. The elasticity estimates confirm that drivers in the Perth area are indeed very sensitive to gasoline price differentials. Copyright 2009 The Author. Journal compilation 2009 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.

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  • Zhongmin Wang, 2009. "Station level gasoline demand in an Australian market with regular price cycles ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(4), pages 467-483, October.
    • Handle: RePEc:bla:ajarec:v:53:y:2009:i:4:p:467-483
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    Cited by:

    1. Wein, Thomas, 2021. "Why abandoning the paradise? Stations incentives to reduce gasoline prices at first," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242362, Verein für Socialpolitik / German Economic Association.
    2. Astrid Fliessbach & Rico Ihle, 2020. "Cycles in cattle and hog prices in South America," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1167-1183, October.
    3. Steen, Frode & Nguyen-Ones, Mai, 2018. "Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?," CEPR Discussion Papers 12879, C.E.P.R. Discussion Papers.
    4. Valadkhani, Abbas, 2013. "Seasonal patterns in daily prices of unleaded petrol across Australia," Energy Policy, Elsevier, vol. 56(C), pages 720-731.
    5. Neukirch Arne & Wein Thomas, 2019. "Price Gouging at the Pump? The Lerner Index and the German Fuel Market," Review of Economics, De Gruyter, vol. 70(2), pages 157-192, August.
    6. Nicolas de Roos & Hajime Katayama, 2013. "Gasoline Price Cycles Under Discrete Time Pricing," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 175-193, June.
    7. Zhongmin Wang, 2009. "(Mixed) Strategy in Oligopoly Pricing: Evidence from Gasoline Price Cycles Before and Under a Timing Regulation," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 987-1030, December.
    8. Noel, Michael D., 2012. "Edgeworth Price Cycles and intertemporal price discrimination," Energy Economics, Elsevier, vol. 34(4), pages 942-954.
    9. Nguyen-Ones , Mai & Steen, Frode, 2018. "Market Power in Retail Gasoline Markets," Discussion Paper Series in Economics 21/2019, Norwegian School of Economics, Department of Economics, revised 01 Jul 2019.
    10. Arezoo Ghazanfari & Armin Razmjoo, 2022. "The Effect of Market Isolation on Competitive Behavior in Retail Petrol Markets," Sustainability, MDPI, vol. 14(13), pages 1-33, July.
    11. Thomas Wein, 2020. "Why abandoning the paradise? Stations incentives to reduce gasoline prices at first," Working Paper Series in Economics 394, University of Lüneburg, Institute of Economics.
    12. Noel, Michael D., 2015. "Do Edgeworth price cycles lead to higher or lower prices?," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 81-93.
    13. Michael D. Noel, 2019. "Calendar synchronization of gasoline price increases," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 355-370, April.
    14. Hashimi, Hasham & Jeffreys, Ian, 2016. "The impact of lengthening petrol price cycles on consumer purchasing behaviour," Economic Analysis and Policy, Elsevier, vol. 51(C), pages 130-137.
    15. David P. Byrne & Nicolas de Roos, 2019. "Learning to Coordinate: A Study in Retail Gasoline," American Economic Review, American Economic Association, vol. 109(2), pages 591-619, February.
    16. Melissa Linder, 2018. "Price cycles in the German retail gasoline market - Competition or collusion?," Economics Bulletin, AccessEcon, vol. 38(1), pages 593-602.
    17. Noel, Michael D. & Chu, Lanlan, 2015. "Forecasting gasoline prices in the presence of Edgeworth Price Cycles," Energy Economics, Elsevier, vol. 51(C), pages 204-214.
    18. Valadkhani, Abbas, 2013. "Modelling the terminal gate prices of unleaded petrol in Australia," Economic Modelling, Elsevier, vol. 33(C), pages 233-243.

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