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Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases

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  • Stanislav Radchenko

    (University of North Carolina at Charlotte)

Abstract

This paper analyzes the effect of volatility in oil prices on the degree of asymmetry in the response of gasoline prices to oil price increases and decreases. Several time series measures of the asymmetry between the responses of gasoline prices to oil price increases and decreases and several measures of the oil price volatility are constructed. In all models, the degree of asymmetry in gasoline prices declines with an increase in oil price volatility. The results support the oligopolistic coordination theory as a likely explanation of the observed asymmetry and are not consistent with the standard search theory and the search theory with Bayesian updating.

Suggested Citation

  • Stanislav Radchenko, 2004. "Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases," Industrial Organization 0408001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0408001
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    More about this item

    Keywords

    gasoline price response; asymmetric response; search theory;
    All these keywords.

    JEL classification:

    • L - Industrial Organization

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