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More New Evidence on Asymmetric Gasoline Price Responses

Abstract:
There exist two possible aggregation issues in studies to asymmetric price responses: (i) an issue due to aggregation over time, and (ii) an issue due to aggregation over space. Empirical studies already confirm the existence of the first issue. This paper confirms the existence of the second issue by studying daily retail prices of individual gasoline stations. I find that 38% of the stations respond asymmetrically to changes in the gasoline spot market price. Hence, asymmetric pricing is a feature of individual firms.

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JEL Codes: C51: Model Construction and Estimation, C55: Large Data Sets: Modeling and Analysis, D40: Market Structure, Pricing, and Design: General, E31: Price Level; Inflation; Deflation, L11: Production, Pricing, and Market Structure; Size Distribution of Firms, L81: Retail and Wholesale Trade; e-Commerce, Q02: Commodity Markets, Q41: Energy: Demand and Supply; Prices

Keywords: Asymmetric Price Responses, Price Setting, Gasoline Markets

DOI: 10.5547/01956574.36.3.rfab

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Published in Volume 36, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.