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On the Effects of Suggested Prices in Gasoline Markets

Author

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  • Riemer P. Faber
  • Maarten C. W. Janssen

Abstract

There is a widespread suspicion that suggested prices act as a focal point for individual firms when setting their prices. Oil companies announce suggested prices for gasoline stations in the Dutch retail market. We show that, compared to the gasoline spot market price, suggested prices contain additional information that explains retail price changes. We conclude that suggested prices have a horizontal coordinating effect in the sense that retail prices react to information that suggested prices contain and that is unrelated to firms’ costs (i.e., the information that firms use under normal competitive conditions).

Suggested Citation

  • Riemer P. Faber & Maarten C. W. Janssen, 2019. "On the Effects of Suggested Prices in Gasoline Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 676-705, April.
    • Handle: RePEc:bla:scandj:v:121:y:2019:i:2:p:676-705
    DOI: 10.1111/sjoe.12289
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    References listed on IDEAS

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    1. Sylwester Bejger, 2019. "Wholesale fuel price adjustment in Poland: examination of competi-tive performance," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 18(4), pages 385-412, December.
    2. George Deltas & Michael Polemis, 2024. "Price Pass-Through Dependence on the Source of Cost Increases: Evidence from the European Gasoline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 65(2), pages 595-626, September.
    3. Erwan Gautier & Magali Marx & Paul Vertier, 2023. "How Do Gasoline Prices Respond to a Cost Shock?," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(4), pages 707-741.
    4. Janssen, Maarten & Reshidi, Edona, 2022. "Regulating recommended retail prices," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    5. Federico M. Accursi & Raúl Bajo-Buenestado & Raul Bajo-Buenestado, 2024. "Do Cooperatives Exercise Market Power? Evidence from Pass-Through to Retail Prices," CESifo Working Paper Series 11473, CESifo.

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