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Rockets and Feathers Revisited: Asymmetric Retail Gasoline Pricing in the Era of Market Transparency

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  • Emmanuel Asane-Otoo
  • Bernhard C. Dannemann

Abstract

In this paper, we revisit the empirical observation that prices rise like rockets when input costs increase but fall like feathers when input costs decrease. The analysis draws on a novel data set that includes daily retail prices of gasoline from 12,804 stations in Germany from January 1, 2014 to December 31, 2018. Our findings based on pooled-panel asymmetric error correction models indicate that the pattern of rockets and feathers is the norm rather than the exception. Our results further show that temporal aggregation of station-level price data leads to inaccurate inferences and could account for the inconclusive findings in the literature.

Suggested Citation

  • Emmanuel Asane-Otoo & Bernhard C. Dannemann, 2022. "Rockets and Feathers Revisited: Asymmetric Retail Gasoline Pricing in the Era of Market Transparency," The Energy Journal, , vol. 43(6), pages 103-122, November.
    • Handle: RePEc:sae:enejou:v:43:y:2022:i:6:p:103-122
    DOI: 10.5547/01956574.43.6.easa
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    References listed on IDEAS

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    1. Granger, C W J & Lee, T H, 1989. "Investigation of Production, Sales and Inventory Relationships Using Multicointegration and Non-symmetric Error Correction Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages 145-159, Supplemen.
    2. Huanxing Yang & Lixin Ye, 2008. "Search with learning: understanding asymmetric price adjustments," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 547-564, June.
    3. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    4. 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. Balaguer, Jacint & Ripollés, Jordi, 2024. "Assessing a fuel subsidy: Dynamic effects on retailer pricing and pass-through to consumers," Energy Economics, Elsevier, vol. 138(C).

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