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Price cycles in the German retail gasoline market - Competition or collusion?

Author

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  • Melissa Linder

    (Helmut-Schmidt-University Hamburg)

Abstract

This paper analyses the cyclical price setting behavior of petrol stations in the German retail gasoline market. High-frequency price cycles can be observed, as gasoline stations undercut each other successively in price over the day followed by a sharp increase in price in the evening. These asymmetric price cycles are compared with theoretical Edgeworth cycles whereby some differences and contradictions are identified. The results of the empirical analysis suggest a strategy of intertemporal price discrimination between different types of consumers. Gasoline stations undercut each other successively over the day to attract consumers with price-elastic demand. However, this undercutting phase is stopped by simultaneous price increases to exploit the inflexible and price-inelastic consumers.

Suggested Citation

  • Melissa Linder, 2018. "Price cycles in the German retail gasoline market - Competition or collusion?," Economics Bulletin, AccessEcon, vol. 38(1), pages 593-602.
    • Handle: RePEc:ebl:ecbull:eb-17-00962
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    References listed on IDEAS

    as
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    6. Øystein Foros & Frode Steen, 2013. "Vertical Control and Price Cycles in Gasoline Retailing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(3), pages 640-661, July.
    7. Wang, Zhongmin, 2009. "Station level gasoline demand in an Australian market with regular price cycles," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(4), pages 1-17.
    8. Nicolas de Roos & Hajime Katayama, 2013. "Gasoline Price Cycles Under Discrete Time Pricing," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 175-193, June.
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    Citations

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    Cited by:

    1. Muijs, Matthias & Bantle, Melissa, 2019. "A New Price Test in Geographic Market Definition - An Application to German Retail Gasoline Market," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203564, Verein für Socialpolitik / German Economic Association.
    2. Iwan Bos & Marco A. Marini, 2022. "Oligopoly Pricing: The Role of Firm Size and Number," Games, MDPI, vol. 14(1), pages 1-16, December.
    3. Cui, Jian & Yang, Hanfang & Wang, Yifan & Yang, Caili, 2023. "Dynamics of the gas retail market under China's price cap regulation," Energy Policy, Elsevier, vol. 174(C).
    4. Bos, Iwan & Marini, Marco A. & Saulle, Riccardo D., 2024. "Myopic oligopoly pricing," Games and Economic Behavior, Elsevier, vol. 145(C), pages 377-412.
    5. Samuel de Haas, 2019. "Do pump prices really follow Edgeworth cycles? Evidence from the German retail fuel market," MAGKS Papers on Economics 201913, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Bantle, Melissa & Muijs, Matthias, 2018. "A new price test in geographic market definition – an application to german retail gasoline market," Working Paper 180/2018, Helmut Schmidt University, Hamburg.

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    More about this item

    Keywords

    price cycles; retail gasoline market; collusion; dynamic price discrimination;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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