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A new model for cycles in retail petrol prices

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  • Anderson, Edward

Abstract

This paper explores the way that retail petrol prices may vary in a cyclical way as a result of competitive behavior by petrol retailers when some drivers choose to fill up early when a low petrol price is available. We include a stochastic model for an individual driver's use of petrol and consider what happens as the expected future price of petrol is adjusted either according to observed prices or in anticipation of cyclical behavior. This model is different from most previous work on petrol price cycles that has focussed on Edgeworth cycles.

Suggested Citation

  • Anderson, Edward, 2011. "A new model for cycles in retail petrol prices," European Journal of Operational Research, Elsevier, vol. 210(2), pages 436-447, April.
    • Handle: RePEc:eee:ejores:v:210:y:2011:i:2:p:436-447
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    References listed on IDEAS

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    1. Castanias, Rick & Johnson, Herb, 1993. "Gas Wars: Retail Gasoline Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 171-174, February.
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    3. Michael D. Noel, 2007. "Edgeworth Price Cycles: Evidence From The Toronto Retail Gasoline Market," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 69-92, March.
    4. Eckert, Andrew & West, Douglas S, 2004. "Retail Gasoline Price Cycles across Spatially Dispersed Gasoline Stations," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 245-273, April.
    5. Oystein Foros & Frode Steen, 2008. "Gasoline Prices Jump Up on Mondays: an Outcome of Aggressive Competition?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2008-20, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    6. Michael D. Noel, 2008. "Edgeworth Price Cycles and Focal Prices: Computational Dynamic Markov Equilibria," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 345-377, June.
    7. Zhongmin Wang, 2008. "Collusive Communication and Pricing Coordination in a Retail Gasoline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(1), pages 35-52, February.
    8. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-599, May.
    9. Eckert, Andrew, 2003. "Retail price cycles and the presence of small firms," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 151-170, February.
    10. Benjamin Atkinson, 2009. "Retail Gasoline Price Cycles: Evidence from Guelph, Ontario Using Bi-Hourly, Station-Specific Retail Price Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 85-110.
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    Cited by:

    1. Arezoo Ghazanfari & Armin Razmjoo, 2022. "The Effect of Market Isolation on Competitive Behavior in Retail Petrol Markets," Sustainability, MDPI, vol. 14(13), pages 1-33, July.
    2. Eben Upton & William J. Nuttall, 2013. "Fuel Panics: insights from spatial agent-based simulation," Working Papers EPRG 1305, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.

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