Gasoline prices jump up on Mondays: An outcome of aggressive competition?

Øystein Foros and Frode Steen

No 2009/2, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: This paper examines Norwegian gasoline pump prices using daily station-specific observations from March 2003 to March 2006. Whereas studies that have analyzed similar price cycles in other countries find support for the Edgeworth cycle theory (Maskin and Tirole, 1988), we demonstrate that Norwegian gasoline price cycles involve a form of coordinated behavior. Retail gasoline prices follow a fixed weekly pattern, where retail outlets all over Norway simultaneously increase their prices to the same level every Monday at noon. Consequently, the sharp price increase is tied to time rather than the current price level. The gasoline companies’ headquarters publish a recommended price that de facto is a RPM arrangement towards the retail outlets. The vertical arrangement is industry-wide adopted, and is used to coordinate the time and the level for retail price increases among the big four gasoline companies. Monday changed from being the low-price day to becoming the high-price day almost ‘overnight’ in April 2004, and we empirically establish that the change corresponds to a significant jump in the gross margin.

Keywords: Gasoline Prices; Resale Price Maintenance (search for similar items in EconPapers)
JEL-codes: E30 E32 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2009-04-14
New Economics Papers: this item is included in nep-com, nep-ene, nep-mac and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Gasoline Prices Jump Up on Mondays: An Outcome of Aggressive Competition? (2008)
Working Paper: Gasoline prices jump up on Mondays: An outcome of aggressive competition? (2008)
Working Paper: Gasoline Prices Jump Up on Mondays: an Outcome of Aggressive Competition? (2008)
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