Dynamic Pricing in Retail Gasoline Markets

Severin Boreinstein and Andrea Shepard
Authors registered in the RePEc Author Service: Severin Borenstein

RAND Journal of Economics, 1996, vol. 27, issue 3, 429-451

Abstract: Supergame models of tacit collusion show that supportable price-cost margins increase with expected future collusive profits, ceteris paribus. As a result, collusive margins will be larger when demand is expected to increase or marginal costs are expected to decline. Using panel data on sales volume and gasoline prices in 43 cities over 72 months, we find behavior consistent with tacit collusion in retail gasoline markets. Controlling for current demand and cost, current margins increase with expected next-month demand and decrease with expected next-month cost. The results are not consistent with intertemporal l inkages due to inventory behavior or customer loyalty.

Date: 1996
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Related works:
Working Paper: Dynamic Pricing in Retail Gazoline Markets (1993)
Working Paper: Dynamic Pricing in Retail Gasoline Markets (1993)
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