Dynamic Pricing in Retail Gasoline Markets

Severin Borenstein and Andrea Shepard

No 4489, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper tests for price patterns in retail gasoline markets consistent with those predicted by models of implicit collusion among firms. Recent supergame models show that the highest supportable collusive price is a function of today's profit relative to expected future profit: collusive prices are higher when predictable changes in demand or cost lead firms to expect that collusive profits are increasing rather than declining. Ceteris paribus, collusive profits will be expected to increase when demand is expected to increase and/or costs are expected to decline. Using panel data on sales volume, and retail and wholesale prices in 59 cities over 72 months, we find results consistent with these predictions. Controlling for current demand and input price, the elasticity of current retail margins with respect to expected next-month demand is about 0.37. The elasticity of current margins with respect to next-month wholesale price is about -0.37. The results are inconsistent with inventory effects.

Date: 1993-10
Note: IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Rand Journal of Economics, Autumn 1996, Vol. 27, no. 3, pp. 429-451

Downloads: (external link)
http://www.nber.org/papers/w4489.pdf (application/pdf)

Related works:
Journal Article: Dynamic Pricing in Retail Gasoline Markets (1996)
Working Paper: Dynamic Pricing in Retail Gazoline Markets (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4489

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4489

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().