Station heterogeneity and asymmetric gasoline price responses

Emmanuel Asane-Otoo () and Bernhard Dannemann
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Emmanuel Asane-Otoo: University of Oldenburg, Department of Economics

No V-436-21, Working Papers from University of Oldenburg, Department of Economics

Abstract: Besides temporal and spatial aggregation issues in the analysis of asymmetric response of retail gasoline prices, previous studies have also largely ignored parameter heterogeneity across fuel stations. This paper addresses the aggregation issues and the parameter homogeneity assumption by examining the responsiveness of stations to input cost changes using daily station-specific retail and wholesale gasoline prices for 12,613 geographically diverse stations. Based on individual station analysis using asymmetric error correction models, we find that 48% of stations engage in competitive pricing while the remaining 52% exhibit the rockets and feathers pricing pattern. Our findings suggest that the rockets and feathers phenomenon is a feature of individual stations and local market characteristics are important determinants. We also show that pooled panel regression techniques obscure the actual pricing pattern observed from station-level time series analysis.

Keywords: Asymmetric Pricing; Input Cost; Price Transparency; Aggregation (search for similar items in EconPapers)
Date: 2021-08, Revised 2021-08
New Economics Papers: this item is included in nep-com, nep-ene, nep-isf, nep-tre and nep-ure
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Published in Oldenburg Working Papers V-436-21

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