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An empirical investigation of the determinants of asymmetric pricing

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  • Remer, Marc

Abstract

This article empirically investigates the cause of asymmetric pricing: retail prices responding faster to cost increases than decreases. Using daily price data for over 11,000 retail gasoline stations, I find that prices fall more slowly than they rise as a consequence of firms extracting informational rents from consumers with positive search costs. Premium gasoline prices are shown to fall more slowly than regular fuel prices, which supports theories based upon competition with consumer search. Further testing also rejects focal price collusion as an important determinant of asymmetric pricing.

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  • Remer, Marc, 2015. "An empirical investigation of the determinants of asymmetric pricing," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 46-56.
    • Handle: RePEc:eee:indorg:v:42:y:2015:i:c:p:46-56
    DOI: 10.1016/j.ijindorg.2015.07.002
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    Cited by:

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    3. Eleftheriou, Konstantinos & Polemis, Michael, 2016. "Gasoline Price Wars: Spatial Dependence Awakens," MPRA Paper 70037, University Library of Munich, Germany.
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    7. Xu, Jiayi & Zhang, Xiao-Bing & Liu, Yang, 2024. "Asymmetric search behavior for gasoline prices: Evidence from the Chinese gasoline market," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 699-712.
    8. Jacint Balaguer & Jordi Ripollés, 2016. "Exploring the life of price responses in fuel markets. Mean group data or mean group estimator?," Working Papers 2016/16, Economics Department, Universitat Jaume I, Castellón (Spain).
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    11. Scott Parrott, 2023. "Comparing Price Transmissions between a High Blend Ethanol Fuel and a Conventional Fuel: An Application of Seemingly Unrelated Regressions," Sustainability, MDPI, vol. 15(22), pages 1-14, November.
    12. Palencia-González, Francisco J. & Navío-Marco, Julio & Juberías-Cáceres, Gema, 2020. "Analysis of brand influence in the rockets and feathers effect using disaggregated data," Research in International Business and Finance, Elsevier, vol. 52(C).
    13. Ederington, Louis H. & Fernando, Chitru S. & Hoelscher, Seth A. & Lee, Thomas K. & Linn, Scott C., 2019. "A review of the evidence on the relation between crude oil prices and petroleum product prices," Journal of Commodity Markets, Elsevier, vol. 13(C), pages 1-15.
    14. Jens‐Peter Loy & Dieter Pennerstorfer & Daniela Rroshi & Christoph Weiss & Biliana Yontcheva, 2022. "Consumer Information and Price Transmission: Empirical Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 70(3), pages 631-683, September.
    15. Sylvain Benoît & Yannick Lucotte & Sébastien Ringuedé, 2019. "Competition and price stickiness: Evidence from the French retail gasoline market," Working Papers hal-02292332, HAL.
    16. Deltas, George & Polemis, Michael, 2020. "Estimating retail gasoline price dynamics: The effects of sample characteristics and research design," Energy Economics, Elsevier, vol. 92(C).
    17. Nishida, Mitsukuni & Remer, Marc, 2018. "Lowering consumer search costs can lead to higher prices," Economics Letters, Elsevier, vol. 162(C), pages 1-4.
    18. Christos Genakos & Blair Yuan Lyu & Mario Pagliero, 2024. "Asymmetric pass-through and competition," CEP Discussion Papers dp2028, Centre for Economic Performance, LSE.
    19. Shih-Hsien Chuang, 2020. "Cost pass-through in the airline industry: price responses and asymmetries," Economics Bulletin, AccessEcon, vol. 40(1), pages 639-652.
    20. Cárdenas, Jeisson & Gutiérrez, Luis H. & Otero, Jesús, 2017. "Investigating diesel market integration in France: Evidence from micro data," Energy Economics, Elsevier, vol. 63(C), pages 314-321.
    21. Julie Bennett & Michael T. Owyang & E. Katarina Vermann, 2021. "Regional Gasoline Price Dynamics," Review, Federal Reserve Bank of St. Louis, vol. 103(3), pages 289-314, July.
    22. Farkas, Richárd & Yontcheva, Biliana, 2019. "Price transmission in the presence of a vertically integrated dominant firm: Evidence from the gasoline market," Energy Policy, Elsevier, vol. 126(C), pages 223-237.
    23. Yi Jiang & Tingting Que & Miaomiao Yu, 2022. "Price asymmetries in the US airline industry," The Financial Review, Eastern Finance Association, vol. 57(4), pages 793-814, November.

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    More about this item

    Keywords

    Asymmetric pricing; Rockets and feathers; Search costs;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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