Testing Optimal Punishment Mechanisms under Price Regulation: the Case of the Retail Market for Gasoline

Robert Gagné, Simon van Norden () and Bruno Versaevel
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Robert Gagné: CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UdeM - Université de Montréal

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Abstract: We analyse the effects of a price floor on price wars (or deep price cuts) in the retail market for gasoline. Bertrand supergame oligopoly models predict that price wars should last longer in the presence of price floors. In 1996, the introduction of a price floor in the Quebec retail market for gasoline serves as a natural experiment with which to test this prediction. We use a Markov Switching Model with two latent states to simultaneously identify the periods of price-collusion/price-war and estimate the parameters characterizing each state. Results support the prediction that price floors reduce the intensity of price wars but increase their expected duration.

Keywords: gasoline prices; Markov switching model; oligopoly supergame; price regulation; collusion; prix de l'essence; régulation (search for similar items in EconPapers)
Date: 2006-10
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00142516
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Citations: View citations in EconPapers (5)

Published in 2006

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Related works:
Working Paper: Testing Optimal Punishment Mechanisms under Price Regulation: the Case of the Retail Market for Gasoline (2006)
Working Paper: Testing Optimal Punishment Mechanisms under Price Regulation: the Case of the Retail Market for Gasoline (2006)
Working Paper: Testing Optimal Punishment Mechanisms Under Price Regulation: the Case of the Retail Market for Gasoline (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00142516

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