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PRICE-RESPONSE ASYMMETRY IN DOMESTIC WHOLESALE AND RETAIL DIESEL 2 MARKETS IN PERU

Arturo Vásquez Cordano

Industrial Organization from EconWPA

Abstract: This paper tests and confirms the hypothesis that retail and wholesale Diesel 2 prices respond more quickly to increases than to decreases in wholesale and crude oil prices, respectively. Among the possible sources of this asymmetry, we find: production / inventory adjustment lags, refining adjustments, market power of some sellers, searching costs, among others. By analyzing price transmission at different points of the distribution chain, this paper attempts to shed light on these theories for the Peruvian oil industry. Wholesale prices for Diesel 2 show asymmetry in responding to crude oil price changes, which may refl ect inventory adjustment effects. Asymmetry also appears in the response that retail prices give to wholesale price changes, presumably indicating short-run local market power among retailers or the existence of searching costs.

Keywords: Price-response asymmetry; oil; Diesel 2 prices; impulse response analysis (search for similar items in EconPapers)
JEL-codes: D43 E31 L71 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene and nep-mac
Date: 2005-12-11
Note: Type of Document - pdf; pages: 15
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpio:0512005

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