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Price-Response Asymmetry In Domestic Wholesale And Retail Diesel 2 Markets In Peru

  • Arturo Vasquez Cordano

    (OSINERG)

This paper tests and confirms the hypothesis that retail and wholesale Diesel 2 prices respond more quickly to increases than to decreases in wholesale and crude oil prices, respectively. Among the possible sources of this asymmetry, we find: production / inventory adjustment lags, refining adjustments, market power of some sellers, searching costs, among others. By analyzing price transmission at different points of the distribution chain, this paper attempts to shed light on these theories for the Peruvian oil industry. Wholesale prices for Diesel 2 show asymmetry in responding to crude oil price changes, which may refl ect inventory adjustment effects. Asymmetry also appears in the response that retail prices give to wholesale price changes, presumably indicating short-run local market power among retailers or the existence of searching costs.

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File URL: http://128.118.178.162/eps/io/papers/0512/0512005.pdf
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Paper provided by EconWPA in its series Industrial Organization with number 0512005.

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Length: 15 pages
Date of creation: 11 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0512005
Note: Type of Document - pdf; pages: 15
Contact details of provider: Web page: http://128.118.178.162

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  1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  2. Sam Peltzman, 1998. "Prices Rise Faster Than They Fall," University of Chicago - George G. Stigler Center for Study of Economy and State 142, Chicago - Center for Study of Economy and State.
  3. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
  4. Nathan S. Balke & Stephen P. A. Brown & Mine Yücel, 1998. "Crude oil and gasoline prices: an asymmetric relationship?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 2-11.
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