Price Cycles and Price Leadership in Gasoline Markets: New Evidence from Canada
This paper studies the determinants of Edgeworth Cycles, price leadership and coordination in retail gasoline markets using daily station-level price data for 110 markets in Ontario, Canada for 2007-2008. We find an “inverse-U” relationship between markets’ propensity to exhibit price cycles and their size. More concentrated markets are less likely to exhibits cycles and we highlight regional clustering among cycling and non-cycling markets. Within cycling markets, we find brands’ stations (Esso, Shell,Petro-Canada, Sunoco) lead price jumps and coordinate market prices, while independents (Ultramar, Pioneer, Olco, MacEwen) aggressively undercut prices over the cycle.
|Date of creation:||2011|
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