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The dynamics pattern of price dispersion in retail fuel markets

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  • Balaguer, Jacint
  • Ripollés, Jordi

Abstract

This paper empirically investigates the dynamics of price dispersion in retail fuel markets as a response to the corresponding wholesale price changes. For this purpose we take advantage of a daily dataset of prices fixed by gas stations in two Spanish regions. It is consistently found that retail price dispersion is temporarily enlarged as a consequence of wholesale price increases, while it is reduced due to decreases. The presence of asymmetries in the short-run dynamics is also revealed. The impact of positive changes in the wholesale price is, in the first days of adjustment, clearly greater. The dynamics pattern could be explained, at least in part, by the faster response of prices in the stations associated with the two vertically integrated companies that have the largest market share (i.e. Repsol and Cepsa).

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  • Balaguer, Jacint & Ripollés, Jordi, 2018. "The dynamics pattern of price dispersion in retail fuel markets," Energy Economics, Elsevier, vol. 74(C), pages 546-564.
    • Handle: RePEc:eee:eneeco:v:74:y:2018:i:c:p:546-564
    DOI: 10.1016/j.eneco.2018.07.004
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    Cited by:

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    2. Balaguer, Jacint & Ripollés, Jordi, 2020. "Do classes of gas stations contribute differently to fuel prices? Evidence to foster effective competition in Spain," Energy Policy, Elsevier, vol. 139(C).

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    More about this item

    Keywords

    Retail price dispersion; Wholesale price variations; Fuel oil markets;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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