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Gasoline Price Wars: Spatial Dependence Awakens

Author

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  • Eleftheriou, Konstantinos
  • Polemis, Michael

Abstract

We build an Asymmetric Spatial Error Correction Model (ASpECM) to investigate the role of spatial dependence at the retail gasoline price adjustment mechanism. We find evidence that the symmetric price pattern is fully reversed when we account for spatial spillover effects, indicating that retail prices adjust more rapidly in an upward than a downward direction. This finding raises the possibility that retailers are more likely to engage in anti-competitive practices which may be ignored when the regulators bypass the role of spatial dependence.

Suggested Citation

  • Eleftheriou, Konstantinos & Polemis, Michael, 2016. "Gasoline Price Wars: Spatial Dependence Awakens," MPRA Paper 70037, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:70037
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    File URL: https://mpra.ub.uni-muenchen.de/70037/1/MPRA_paper_70037.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    ASpECM; Spatial dependence; Asymmetric gasoline price adjustment;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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