The Speed of Gasoline Price Response in Markets with and without Edgeworth Cycles
Retail gasoline prices are known to respond fairly slowly to wholesale price changes. This does not appear to be true for markets with Edgeworth price cycles. Recently many retail gasoline markets in the midwestern United States and other countries have been shown to exhibit price cycles in which competition generates rapid cyclical retail price movements. We show that cost changes in cycling markets are passed on two to three times faster than in markets without cycles. We argue that the constant price movement inherent within the Edgeworth cycle eliminates price frictions and allows firms to pass on cost fluctuations more easily. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 93 (2011)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lewis, Matt, 2004.
"Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market,"
Competition Policy Center, Working Paper Series
qt9pv2d9fn, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Matthew S. Lewis, 2011. "Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 409-449, 06.
- Matt Lewis, 2004. "Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market," Industrial Organization 0407010, EconWPA.
- Doyle, Joseph & Muehlegger, Erich & Samphantharak, Krislert, 2010.
"Edgeworth cycles revisited,"
Elsevier, vol. 32(3), pages 651-660, May.
- Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997.
"Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(1), pages 305-339.
- Severin Borenstein & A. Colin Cameron, 1992. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," NBER Working Papers 4138, National Bureau of Economic Research, Inc.
- George Deltas, 2008. "RETAIL GASOLINE PRICE DYNAMICS AND LOCAL MARKET POWER -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 613-628, 09.
- Lance J. Bachmeier & James M. Griffin, 2003. "New Evidence on Asymmetric Gasoline Price Responses," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 772-776, August.
- Zhongmin Wang, 2008. "Collusive Communication and Pricing Coordination in a Retail Gasoline Market," Review of Industrial Organization, Springer, vol. 32(1), pages 35-52, February.
- Eckert, Andrew, 2003. "Retail price cycles and the presence of small firms," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 151-170, February.
- Michael D. Noel, 2007. "Edgeworth Price Cycles, Cost-Based Pricing, and Sticky Pricing in Retail Gasoline Markets," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 324-334, May.
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:93:y:2011:i:2:p:672-682. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kristin Waites)
If references are entirely missing, you can add them using this form.