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How do Co nsumers Respond to Gasoline

Author

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  • David P. Byrne,
  • Gordon Leslie

Abstract

This paper empirically studies how consumers respond to retail gasoline price cycles. Our analys is uses new station-level price data from local markets in Ontario, Canada, and a unique market-level measure of consumer responsiveness based on web traffic from gasoline price reporting websites. We first document how stations use coordinated pricing strategies that give rise to large daily changes in price levels and dispersion in cycling gasoline markets. We then show consumer responsiveness exhibits cycles that move with these price fluctuations. Through a series of tests we further show that forward-looking stockpiling behavior by consumers plays a central role in generating these patterns.

Suggested Citation

  • David P. Byrne, & Gordon Leslie, 2013. "How do Co nsumers Respond to Gasoline," Department of Economics - Working Papers Series 1176, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1176
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0004/857263/1176.pdf
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    Citations

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    Cited by:

    1. 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).
    2. David P. Byrne & Nicolas de Roos, 2014. "Search and Stockpiling in Retail Gasoline Markets," Department of Economics - Working Papers Series 1181, The University of Melbourne.
    3. 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).
    4. 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).
    5. 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.
    6. David P. Byrne & Nicolas de Roos, 2017. "Consumer Search in Retail Gasoline Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 183-193, March.

    More about this item

    Keywords

    Retail gasoline price cycles; Dynamic demand; Consumer search;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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