Asymmetric pass-through and competition

Christos Genakos, Blair Yuan Lyu and Mario Pagliero

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We study the retail price pass-through of four major tax changes in petroleum products using daily pricing data from gas stations on small Greek islands. We find that (i) the pass-through of the tax hikes is five times higher than for the tax decrease, (ii) the pass-through of the tax hikes increases with competition, while that of the tax decrease does not, (iii) there is significant asymmetry in the speed of price adjustments, and,(iv) the asymmetric price adjustment cannot be explained by tacit collusion, instead the evidence suggests that search is the most plausible explanation. We dedicate this paper to the loving memory of Mario Pagliero, a brilliant economist and a dear friend, who passed away too soon.

Keywords: pass-through; rockets and feathers; tax incidence; gasoline market; market structure; competition (search for similar items in EconPapers)
Date: 2024-08-30
New Economics Papers: this item is included in nep-com, nep-ind, nep-pub and nep-reg
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