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Rockets and Feathers Revisited: Asymmetric Retail Gasoline Pricing in the Era of Market Transparency

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Abstract:
In this paper, we revisit the empirical observation that prices rise like rockets when input costs increase but fall like feathers when input costs decrease. The analysis draws on a novel data set that includes daily retail prices of gasoline from 12,804 stations in Germany from January 1, 2014 to December 31, 2018. Our findings based on pooled-panel asymmetric error correction models indicate that the pattern of rockets and feathers is the norm rather than the exception. Our results further show that temporal aggregation of station-level price data leads to inaccurate inferences and could account for the inconclusive findings in the literature.

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Keywords: Asymmetric Pricing, Market Transparency, Search Intensity, Tacit Collusion

DOI: 10.5547/01956574.43.6.easa

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Published in Volume 43, Number 6 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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