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Asymmetric price adjustments in US gasoline markets: impacts of spatial dependence on the ‘rockets and feathers’ hypothesis

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  • Konstantinos Eleftheriou
  • Peter Nijkamp
  • Michael L. Polemis

Abstract

Gasoline retail prices show sometimes wild, asymmetric fluctuations over time. We explore the impact of spatial dependence on gasoline retail price formation by using for the first time an asymmetric spatial error correction model (ASpECM). We find evidence that the generally assumed symmetric price pattern is fully reversed when we account for spatial spillover effects, indicating that retail prices adjust more rapidly in an upward than in a downward direction. This finding suggests that empirical studies that ignore the role of spatial dependence and local competition may miss an important element of the nature of the gasoline price adjustment mechanism.

Suggested Citation

  • Konstantinos Eleftheriou & Peter Nijkamp & Michael L. Polemis, 2019. "Asymmetric price adjustments in US gasoline markets: impacts of spatial dependence on the ‘rockets and feathers’ hypothesis," Regional Studies, Taylor & Francis Journals, vol. 53(5), pages 667-680, May.
    • Handle: RePEc:taf:regstd:v:53:y:2019:i:5:p:667-680
    DOI: 10.1080/00343404.2018.1463093
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    Cited by:

    1. Holmes, Mark J. & Otero, Jesús, 2023. "Asymmetric behaviour and the 9-ending pricing of retail gasoline," Energy, Elsevier, vol. 263(PC).
    2. Zacharias Bragoudakis & Stavros Degiannakis & George Filis, 2019. "Oil and pump prices: is there any asymmetry in the Greek oil downstream sector?," Working Papers 268, Bank of Greece.
    3. Chen, Chaoyi & Polemis, Michael & Stengos, Thanasis, 2019. "Can exchange rate pass-through explain the asymmetric gasoline puzzle? Evidence from a pooled panel threshold analysis of the EU," Energy Economics, Elsevier, vol. 81(C), pages 1-12.
    4. James Ming Chen & Mobeen Ur Rehman, 2021. "A Pattern New in Every Moment: The Temporal Clustering of Markets for Crude Oil, Refined Fuels, and Other Commodities," Energies, MDPI, vol. 14(19), pages 1-58, September.
    5. Sofronis Clerides & Sotiria Charalambous, 2020. "Fuel price pass-through in Cyprus," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 14(1), pages 27-40, June.
    6. Jing Xu & Alan T. Murray, 2019. "Spatial variability in retail gasoline markets," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 581-603, June.
    7. Chen, Chaoyi & Polemis, Michael & Stengos, Thanasis, 2018. "On the Examination of Competition in the Petroleum Industry: A Pooled Panel Threshold Analysis," MPRA Paper 89671, University Library of Munich, Germany.
    8. Deltas, George & Polemis, Michael, 2020. "Estimating retail gasoline price dynamics: The effects of sample characteristics and research design," Energy Economics, Elsevier, vol. 92(C).
    9. Michal Kvasnička, 2022. "Can we ignore spatial dependence when evaluating mergers?," Empirical Economics, Springer, vol. 62(3), pages 1323-1344, March.

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