Testing the Alchian-Allen Theorem: A Study of Consumer Behavior in the Gasoline Market

Robert Lawson and Lauren Raymer ()
Additional contact information
Lauren Raymer: University of North Carolina
Authors registered in the RePEc Author Service: Lauren Raymer Heller

Economics Bulletin, 2006, vol. 4, issue 35, 1-6

Abstract: This paper uses a data set of daily sales at a single gasoline station over a seven year period to determine if consumers respond to relative price changes among the three grades of gasoline. Based on the reasoning of Alchian and Allen (1964) and Barzel (1976), market shares of higher quality gasoline should increase at the expense of regular grade gasoline when overall gasoline prices increase. The empirical results do not conform to this expectation. We find instead that the consumers in this sample responded to higher gasoline prices by switching to mid grade gasoline from premium grade gasoline leaving the market share of regular gasoline unchanged.

Keywords: Alchian-Allen; Theorem (search for similar items in EconPapers)
JEL-codes: D0 (search for similar items in EconPapers)
Date: 2006-10-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2006/Volume4/EB-06D00021A.pdf (application/pdf)

Related works:
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:ebl:ecbull:eb-06d00021

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().