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A comparison of regular price cycles in gasoline and liquefied petroleum gas

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  • Isakower, Sean
  • Wang, Zhongmin

Abstract

Regular and asymmetric gasoline price cycles are observed in a number of countries. While most studies found that such price cycles are well characterized by the theoretical Edgeworth price cycle, some studies suggest alternative explanations. This paper contributes to this literature by being the first to compare regular price cycles in a nongasoline product—liquefied petroleum gas (LPG)—with gasoline price cycles. Our main finding is that LPG price cycles in the Perth area of Western Australia are much longer and more asymmetric than gasoline price cycles in the same market. This finding is consistent with Noel's (2008) prediction that Edgeworth cycles are longer and more asymmetric when aggregate demand is more elastic—the aggregate demand for LPG is presumably more elastic than the demand for gasoline.

Suggested Citation

  • Isakower, Sean & Wang, Zhongmin, 2014. "A comparison of regular price cycles in gasoline and liquefied petroleum gas," Energy Economics, Elsevier, vol. 45(C), pages 445-454.
    • Handle: RePEc:eee:eneeco:v:45:y:2014:i:c:p:445-454
    DOI: 10.1016/j.eneco.2014.08.014
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    Cited by:

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    2. Sun, Zuo-Yu & Li, Guo-Xiu, 2015. "On reliability and flexibility of sustainable energy application route for vehicles in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 51(C), pages 830-846.
    3. David P Byrne & Jia Sheen Nah & Peng Xue, 2018. "Australia Has the World's Best Petrol Price Data: FuelWatch and FuelCheck," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(4), pages 564-577, December.
    4. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2015. "Price dispersion and station heterogeneity on German retail gasoline markets," DICE Discussion Papers 171, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. 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, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    6. Siekmann, Manuel, 2017. "Characteristics, causes, and price effects: Empirical evidence of intraday Edgeworth cycles," DICE Discussion Papers 252, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    Edgeworth price cycle; Liquefied petroleum gas; Oligopoly pricing; Price elasticity;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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