 Do Edgeworth price cycles lead to higher or lower prices?International Journal of Industrial Organization, 2015, vol. 42, issue C, 81-93 Abstract: A recent literature seeks to understand the causes of the high-frequency, asymmetric retail price cycles observed in many retail gasoline markets. However, much less attention has been given to the effects of the cycles, in particular, whether the cycles lead to higher or lower prices and margins. The leading theory for the underlying cause of the price cycles, Edgeworth price cycles, is silent on the issue. The challenge in addressing this most important question has been the difficulty in isolating cycle effects from other confounding factors, especially market structure. In this article, I exploit a unique natural experiment to isolate the effect of cycles — a refinery fire that, in a matter of days, halted cycles that had previously persisted for decades. I find that Edgeworth price cycles lead to lower prices and lower margins. I conclude with implications for competition policy. Keywords: Edgeworth price cycles; Retail gasoline; Price effects; Margin effects; Natural experiment; Competition policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:42:y:2015:i:c:p:81-93 DOI: 10.1016/j.ijindorg.2015.07.003 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.