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Edgeworth Price Cycles in Gasoline: Evidence from the United States

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  • Paul Zimmerman

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  • John Yun

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  • Christopher Taylor

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Abstract

Studies of gasoline prices in multiple countries have found sequences of a sharp price increase followed by gradual decreases. This pattern is linked to Maskin and Tirole (Econometrica 56:571–599, 1988 ) duopoly pricing game and labeled Edgeworth price cycles. We examine data on average daily MSA-level retail gasoline prices for 350 MSAs in the US from 1996–2010. We confirm the finding of others and show that a relatively small number of US MSAs in contiguous upper Midwestern states evidence price cycling. However, our lengthy data set allows us to see that these MSAs began cycling in 2000. Thus, we can examine prices in cycling and non-cycling MSAs before and after cycling and find that prices are lower in MSAs that began cycling. Copyright Springer Science+Business Media New York (outside the USA) 2013

Suggested Citation

  • Paul Zimmerman & John Yun & Christopher Taylor, 2013. "Edgeworth Price Cycles in Gasoline: Evidence from the United States," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(3), pages 297-320, May.
  • Handle: RePEc:kap:revind:v:42:y:2013:i:3:p:297-320
    DOI: 10.1007/s11151-012-9372-6
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fullerton, Thomas M. & Jiménez, Alan A. & Walke, Adam G., 2015. "An econometric analysis of retail gasoline prices in a border metropolitan economy," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 450-461.
    2. repec:aen:journl:ej38-6-hauca is not listed on IDEAS
    3. Matthew Chesnes, 2016. "Asymmetric Pass-Through in U.S. Gasoline Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    4. 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).
    5. 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.
    6. Chien, YiLi & Morris, Paul, 2016. "Filling the Tank on Fridays May Be a Bad Idea for St. Louisans," Economic Synopses, Federal Reserve Bank of St. Louis, issue 8, pages 1-2.
    7. 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).
    8. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    9. 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.
    10. 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.

    More about this item

    Keywords

    Gasoline; Dynamic oligopoly; Edgeworth price cycles; Petroleum industry; D4; L44; L81;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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