Asymmetric pricing dynamics with market power: investigating island data of the retail gasoline market

Woo-Hyung Hong and Daeyong Lee ()
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Woo-Hyung Hong: Hansung University
Daeyong Lee: Iowa State University

Empirical Economics, 2020, vol. 58, issue 5, No 7, 2221 pages

Abstract: Abstract This paper investigates how and why a link between market power and asymmetric pricing occurs. Analyzing unique island panel data of the Korean gasoline market, we exploit geographic separation as a reliable measure of market power. Our findings confirm a positive correlation between market power and price-response asymmetry. The empirical results on sticky pricing behaviors suggest that tacit collusion is the main channel through which market power influences asymmetric pricing. In addition, we examine the effect of station heterogeneity on asymmetric pricing to provide further evidence of tacit collusion in a localized market.

Keywords: Asymmetric pricing; Market power; Geographic separation; Tacit collusion; Consumer search; Sticky pricing (search for similar items in EconPapers)
JEL-codes: D43 D82 L11 L13 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00181-018-1614-5

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