The Effects of a Day Off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailing

Øystein Foros, Mai Thi Nguyen () and Frode Steen
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Mai Thi Nguyen: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

No 2017/9, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: First, we analyze how regular days off from competition and a time-dependent price pattern affect firm performance. Second, we examine the effects on firms' profitability from consumers’ changing search- and timing behavior. We use microdata from gasoline retailing in Norway. Since 2004, firms have practiced an industry-wide day off from competition, starting on Mondays at noon, by increasing prices to a common level given by the recommended prices (decided and published in advance). Hence, firms know when and to what level to raise their price. In areas without local competition, retail prices are always equal to the recommended prices. Hinged on this, we regard recommended prices as the monopoly price level. In turn, a foreseeable low-price window is open before every restoration. During the data period, we observe an additional weekly restoration on Thursdays at noon. We show that an additional day off from competition increases firm performance. As expected, a conventional price search of where to buy reduces firms’ profitability. In contrast, consumers who are aware of the cycle and spend effort on when to buy have a positive impact on firms’ profitability. If consumers spend effort on when to buy rather than where to buy, price competition might be softened even in the low-price windows.

Keywords: Consumer Behavior; Firm Performance; Gasoline Retailing (search for similar items in EconPapers)
JEL-codes: L00 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2017-07-06
New Economics Papers: this item is included in nep-bec, nep-com and nep-mkt
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http://hdl.handle.net/11250/2448040 (application/pdf)

Related works:
Journal Article: The Effects of a Day off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailing (2021)
Working Paper: The Effects of a Day Off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailin (2017)
Working Paper: The Effects of a Day Off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailing (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhhfms:2017_009

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