Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market

Matthew Lewis

Journal of Economics & Management Strategy, 2011, vol. 20, issue 2, 409-449

Abstract: This article proposes a new explanation for why retail prices respond more quickly to cost increases than cost decreases. I develop a search model that assumes consumers’ expectations of prices are based on prices observed during previous purchases. This model predicts that consumers search less when prices are falling, which results in higher profit margins and a slower price response to cost changes. I then empirically examine patterns of retail gasoline price response and price dispersion to show that this model predicts observed price behavior better than previously suggested explanations.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (125)

Downloads: (external link)
https://doi.org/10.1111/j.1530-9134.2011.00293.x

Related works:
Working Paper: Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market (2004)
Working Paper: Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market (2004)
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:bla:jemstr:v:20:y:2011:i:2:p:409-449

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().