THE ROCKETS AND FEATHERS HYPOTHESIS: AN APPLICATION TO GASOLINE PRICES IN FIJI

B. Bhaskara Rao () and Gyaneshwar Rao

The Icfai Journal of Applied Economics, 2006, vol. V, issue 5, pages 67-71

Abstract: Bacon (1991) labeled asymmetric price adjustments in the oligopoly markets as the rockets and feathers hypothesis where firms increase prices faster than decrease in response to changes in costs and market conditions. In this paper, the authors test this hypothesis for the gasoline market in Fiji and show that there are asymmetric price adjustments. It is found that oil firms in Fiji increase gasoline prices twice faster.

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