Endogenous price commitment, sticky and leadership pricing: Evidence from the Italian petrol market

Patrick Andreoli-Versbach () and Jens-Uwe Franck

International Journal of Industrial Organization, 2015, vol. 40, issue C, 32-48

Abstract: This article studies dynamic pricing strategies in the Italian gasoline market before and after the market leader unilaterally announced its commitment to adopt a sticky-pricing policy. Using daily Italian firm level prices and weekly average EU prices, we show that the effect of the new policy was twofold. First, it facilitated price alignment and coordination on price changes. After the policy change, the observed pricing pattern shifted from cost-based to sticky-leadership pricing. Second, using a dif-in-dif estimation and a synthetic control group, we show that the causal effect of the new policy was to significantly increase prices through sticky-leadership pricing. Our paper highlights the importance of price-commitment by a large firm in order to sustain (tacit) collusion.

Keywords: Tacit collusion; Leadership pricing; Sticky pricing; Endogenous commitment (search for similar items in EconPapers)
JEL-codes: K21 K42 L13 L41 L71 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Working Paper: Endogenous Price Commitment, Sticky and Leadership Pricing: Evidence from the Italian Petrol Market (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:40:y:2015:i:c:p:32-48

DOI: 10.1016/j.ijindorg.2015.02.006

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