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How do Consumers Respond to Gasoline Price Cycles?

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  • David P. Byrne
  • Gordon W. Leslie
  • Roger Ware

Abstract

This paper empirically studies how consumers respond to retail gasoline price cycles. Our analysis uses new station-level price data from local markets in Ontario, Canada, and a unique market-level measure of consumer responsiveness based on web traffic from gasoline price reporting websites. We first document how stations use coordinated pricing strategies that give rise to large daily changes in price levels and dispersion in cycling gasoline markets. We then show consumer responsiveness exhibits cycles that move with these price fluctuations. Through a series of tests we find that forward-looking stockpiling behavior by consumers plays a central role in generating these patterns.

Suggested Citation

  • David P. Byrne & Gordon W. Leslie & Roger Ware, 2015. "How do Consumers Respond to Gasoline Price Cycles?," The Energy Journal, , vol. 36(1), pages 115-148, January.
    • Handle: RePEc:sae:enejou:v:36:y:2015:i:1:p:115-148
    DOI: 10.5547/01956574.36.1.5
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    References listed on IDEAS

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    5. Zhongmin Wang, 2009. "(Mixed) Strategy in Oligopoly Pricing: Evidence from Gasoline Price Cycles Before and Under a Timing Regulation," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 987-1030, December.
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