Download or read book Asymmetries in Retail Gasoline Price Dynamics and Local Market Power written by George Deltas and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using monthly data from the 48 contiguous states (except Nevada) for the 1988-2002 period, it is shown that retail gasoline prices respond faster to wholesale price increases than to equivalent wholesale price decreases. Moreover, markets with high average retail-wholesale margins experience a slower adjustment and a higher degree of asymmetry. These results are robust to whether or not an error correction term is used, and to a number of other specifications. Since gasoline is the only variable input, one could reasonably assume that average margins in a state reflect the degree of market power at the retail level. This suggests that sticky prices and response asymmetries in the gasoline market are, at least partially, a consequence of retail market power, raising the possibility that slow price adjustments and asymmetric price responses could be used as an indicator of potential departure from perfect competition. It is also shown that out-of-sample forecasts based on asymmetric models yield substantially better predictions for the path of retail prices than forecasts based on the symmetric models. This result is robust to different measures of forecast accuracy. The higher accuracy of the out-of-sample forecasts based on asymmetric models indicates that these asymmetries are not just an outcome of fitting to a particular sample but represent the underlying data generating process.
Download or read book Retail Gasoline Price Dynamics and Local Market Power written by George Deltas and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using monthly data from the 48 contiguous states (except Nevada) for the 1988-2002 period, it is shown that retail gasoline prices respond faster to wholesale price increases than to equivalent wholesale price decreases. Moreover, markets with high average retail-wholesale margins experience a slower adjustment and a more asymmetric response. Since gasoline is the only variable input, average margins in a state likely reflect the degree of retail market power. This suggests that sticky prices and response asymmetries in the gasoline market are, at least partially, a consequence of retail market power.
Download or read book Price Response Asymmetry and Spatial Differentiation in Local Retail Gasoline Markets written by Jeremy A. Verlinda and published by BiblioGov. This book was released on 2013-06 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the possibility that local market power influences the observed asymmetric relationship between changes in wholesale gasoline costs and changes in retail gasoline prices. I exploit an original data set of weekly gas station prices in Southern California from September 2002 to May 2003, and take advantage of detailed station and local market level characteristics to determine the extent to which spatial differentiation influences price response asymmetry. I find that brand identity, proximity to rival stations, bundling and advertising, operation type, and local market features and demographics each influence a station's predicted price-response asymmetry.
Download or read book Price response Asymmetry and Spatial Differentiation in Local Retail Gasoline Markets written by Jeremy A. Verlinda and published by . This book was released on 2007 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Asymmetric Dynamic Pricing in a Local Gasoline Retail Market written by Felipe Balmaceda and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asymmetric-price adjustment is a common phenomenon in many markets around the world, particularly in retail gasoline markets. This paper studies the existence of this phenomenon in the retail gasoline market in the city of Santiago, Chile, using a data set of weekly gas station prices that covers a period of almost four years. We found that prices adjust asymmetrically, and the asymmetry is different for branded gas stations and unbranded stations. In addition, we found that the asymmetry for high-margin stations is statistically equivalent to that for low-margin stations. This evidence is suggestive of collusion as a rationale for the asymmetric pricing policy observed.
Download or read book Essays on Information Competition and Pricing Dynamics in the Retail Gasoline Market written by Woo-Hyung Hong and published by . This book was released on 2015 with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the role of information in market performance, and pricing dynamics observed in the retail gasoline market. In Chapter 1, we empirically test whether smartphones, as information-providing devices, can improve market performance and reduce price dispersion. We treat the introduction of smartphones in the Korean gasoline market as a natural experiment to investigate the impact of smartphones on competition among gas stations. Smartphones provided consumers with direct access to price information through OPINET, a government-sponsored Internet website. Our results indicate that the adoption of smartphones is associated with dramatic decreases in price dispersion and average price-cost margins, thereby creating consumer gains. Additionally, we found a sudden decline in entries and a slow increase in exits after the introduction of smartphones. Chapter 2 investigates how and why a link between market power and asymmetric pricing occurs. Exploiting unique island panel data from the Korean gasoline market, we propose geographical separation as a reliable measure of market power. Our findings confirm a positive correlation between market power and price-response asymmetry. We provide direct evidence of tacit collusion by investigating sticky pricing behaviors and suggest that the tacit collusion is the main channel through which market power influences asymmetric pricing. Additionally, we examine the effect of station heterogeneity on asymmetric pricing to provide further evidence of tacit collusion even in relatively competitive environments.
Download or read book Do Rockets Rise Faster and Feathers Fall Slower in an Atmosphere of Local Market Power Evidence from the Retail Gasoline Market written by Jeremy A. Verlinda and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the possibility that local market power influences the observed asymmetric relationship between changes in wholesale gasoline costs and changes in retail gasoline prices. I exploit an original data set of weekly gas station prices in Southern California from September 2002 to May 2003, and take advantage of detailed station and local market level characteristics to determine the extent to which geographic and product differentiation influences price response asymmetry. I find that brand identity, proximity to rival stations, and local market features and demographics each influence a station's predicted price-response asymmetry. Web Appendix available at: http://ssrn.com/abstract=1000964.
Download or read book Asymmetric Pass Through in U S Gasoline Prices written by Federal Trade Commission and published by CreateSpace. This book was released on 2014-09-25 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents new evidence of asymmetric pass-through, the notion that upward cost shocks are passed through faster than downward cost shocks, in U.S. gasoline prices. Much of the extant literature comes to seemingly contradictory conclusions about the existence of an asymmetry, though the differences may be due to different aggregation (both over time and geographic markets) and the use of different price series including crude oil, wholesale, and retail gasoline prices. I utilize a large and detailed dataset to determine where evidence of a pass-through asymmetry exists, and how it depends on the aggregation and price series chosen by the researcher. Using the standard error correction model, I find evidence of pass-through asymmetry in the response of daily and weekly retail prices to wholesale rack price changes, though the magnitude varies by geographic market. On average, retail prices rise more than four times as fast as they fall. Branded gasoline features significantly more asymmetry with respect to rack prices compared with unbranded gasoline. Over time, nation-wide asymmetry varies significantly from year to year peaking in 2005. Midwest cities, like Louisville and Minneapolis, feature more asymmetry compared with other parts of the country. F-tests broadly confirm the results and illustrate that data selection and aggregation, as well as model specification, can have important implications on the findings of asymmetric pass-through.
Download or read book Price Changes in the Gasoline Market written by and published by DIANE Publishing. This book was released on 1999 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report examines a recurring question about gasoline markets: why, especially in times of high price volatility, do retail gasoline prices seem to rise quickly but fall back more slowly? Do gasoline prices actually rise faster than they fall, or does this just appear to be the case because people tend to pay more attention to prices when they`re rising? This question is more complex than it might appear to be initially, and it has been addressed by numerous analysts in government, academia and industry. The question is very important, because perceived problems with retail gasoline pricing have been used in arguments for government regulation of prices. The phenomenon of prices at different market levels tending to move differently relative to each other depending on direction is known as price asymmetry. This report summarizes the previous work on gasoline price asymmetry and provides a method for testing for asymmetry in a wide variety of situations. The major finding of this paper is that there is some amount of asymmetry and pattern asymmetry, especially at the retail level, in the Midwestern states that are the focus of the analysis. Nevertheless, both the amount asymmetry and pattern asymmetry are relatively small. In addition, much of the pattern asymmetry detected in this and previous studies could be a statistical artifact caused by the time lags between price changes at different points in the gasoline distribution system. In other words, retail gasoline prices do sometimes rise faster than they fall, but this is largely a lagged market response to an upward shock in the underlying wholesale gasoline or crude oil prices, followed by a return toward the previous baseline. After consistent time lags are factored out, most apparent asymmetry disappears.
Download or read book Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes written by Severin Borenstein and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test and confirm that retail gasoline prices respond more quickly to increases than to decreases in crude oil prices. Among the possible sources of this asymmetry are production/ inventory adjustment lags and market power of some sellers. By analyzing price transmission at different points in the distribution chain, we attempt to shed light on these theories. Spot prices for generic gasoline show asymmetry in responding to crude oil price changes, which may reflect inventory adjustment effects. Asymmetry also appears in the response of retail prices to wholesale price changes, possibly indicating short-run market power among retailers.
Download or read book Gasoline Pricing in the Country and the City written by David P. Byrne and published by . This book was released on 2018 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: In many markets, prices adjust quickly when costs rise, yet adjust sluggishly when costs fall. Such asymmetric pricing has received particular attention in retail gasoline where, worryingly, larger asymmetry has been related to greater market power. Using novel data from urban and rural gasoline markets, I document new evidence on this relationship by providing the first estimates of asymmetric pricing from rural towns. I find substantial asymmetry in these markets, show local market concentration is positively related to asymmetry, and highlight the role collusion potentially plays in generating these patterns.
Download or read book The Distributional Implications of the Impact of Fuel Price Increases on Inflation written by Mr. Kangni R Kpodar and published by International Monetary Fund. This book was released on 2021-11-12 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
Download or read book Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes written by Severin Borenstein and published by . This book was released on 1992 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our empirical investigation confirms the common belief that retail gasoline prices react more quickly to increases in crude oil prices than to decreases. Nearly all of the response to a crude oil price increase shows up in the pump price within 4 weeks, while decreases are passed along gradually over 8 weeks. The asymmetry could indicate market power of some producers or distributors, or it could result from inventory adjustment costs. By analyzing price transmission at different points in the distribution chain we investigate these theories. We find that some asymmetry occurs at the level of the competitive spot market for gasoline, perhaps reflecting inventory costs. Wholesale gasoline prices, however, exhibit no asymmetry in responding to crude oil price changes, indicating that refiners who set wholesale prices are not the source of the asymmetry. The most significant asymmetry appears in the response of retail prices to wholesale price changes. We argue that this probably reflects short run market power among retail gasoline sellers.
Download or read book Price response Asymmetry and Spatial Differetntiation in Local Retail Gasoline Markets written by Jeremy A. Verlinda and published by . This book was released on 2007 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Do Retail Gasoline Prices Adjust Symmetrically to Crude Oil Price Changes The Case of the Greek Oil Market written by Zacharias Bragoudakis and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of the present paper is to test for asymmetry in the Greek retail gasoline price adjustments to crude oil price changes for the period January 2005-July 2012.The empirical analysis provides evidence that the adjustment of gasoline prices to oil price changes is asymmetric, in contrast to findings of previous studies which have applied other, less robust econometric techniques. Asymmetric adjustment implies a strategy, according to which market participants delay lowering the retail gasoline prices when crude oil prices fall, but rush to increase them when crude oil prices rise, in an effort to maximise profits. Such a strategy may be the result of non-competitive conditions in the structure of the fuel market in Greece.
Download or read book Retail and Wholesale Gasoline Price Adjustments in Response to Oil Price Changes written by Donald Bumpass and published by . This book was released on 2015 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research examines the long-run relationship between the spot oil price and retail and wholesale gasoline prices. Recent research suggests that the response of the retail gasoline price is faster and the size of the change is larger, in magnitude, following a crude oil price increase compared with periods when the crude oil price is falling; however, some recent papers examining potential asymmetries present mixed results. Our results from a common threshold model estimating the adjustment of gasoline prices and the spot oil price suggest a long-run relationship between retail and wholesale gasoline prices and the crude oil price. Further, results here suggest that both retail and wholesale gasoline prices respond symmetrically to an oil price shock in the long run, indicating little market power by gas stations and wholesalers.
Download or read book The Internet Search and Asymmetric Pricing written by David P. Byrne and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: How does the Internet effect retail pricing? In contrast to previous empirical research that focuses on price dispersion and static margins, this paper examines how the Internet and web-based price clearing houses effect dynamic asymmetric pricing adjustment (e.g., "rockets and feathers"). We exploit a unique policy intervention in the context of the retail gasoline market that introduced a price clearinghouse in some markets but not others. We find stark evidence that the policy eliminated asymmetric price adjustment and increase the rate of passthrough of falling costs to retail prices. These results support search-based explanations for asymmetric price adjustment.
