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On the dynamics of gasoline market integration in the United States: Evidence from a pair-wise approach

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  • Holmes, Mark J.
  • Otero, Jesús
  • Panagiotidis, Theodore

Abstract

This paper employs a pair-wise approach to examine regional integration in the US gasoline market. Using gasoline price data at the state level over a period of more than two decades, we find strong support for the view that the law of one price holds in regional markets, as more than 80% of bivariate price differentials turn out to be stationary. Furthermore, we uncover evidence that the speed at which prices converge to the long-run equilibrium depends upon the distance between states. Asymmetries are also present in this relationship. Our findings suggest that the more similar are states with respect to taxation, gas stations and refining capacity, the faster is the speed of adjustment towards the long-run equilibrium.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 36 (2013)
Issue (Month): C ()
Pages: 503-510

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Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:503-510
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

Keywords: Panel data; Pair-wise approach; Market integration; Gasoline; Speed of adjustment;

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Find related papers by JEL classification:
  • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
  • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
  • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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Cited by:

  1. Ikeno, Hidehiro, 2014. "Long-run analysis on convergence of Japanese local price levels: A pairwise approach," Economic Modelling, Elsevier, vol. 42(C), pages 390-397.
  2. Balaguer, Jacint & Ripollés, Jordi, 2014. "Are the transport fuel retail markets regionally integrated in Spain? Evidence from price transmission," Economic Modelling, Elsevier, vol. 42(C), pages 323-332.

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