IDEAS home Printed from https://ideas.repec.org/a/spr/anresc/v57y2016i1d10.1007_s00168-016-0775-4.html
   My bibliography  Save this article

Understanding gasoline price dispersion

Author

Listed:
  • Demet Yilmazkuday

    (Florida International University)

  • Hakan Yilmazkuday

    (Florida International University)

Abstract

This paper models and estimates the gasoline price dispersion across time and space by using a unique data set at the gas station level within the USA. Nationwide effects (measured by time fixed effects or crude oil prices) explain up to about 51 % of the gasoline price dispersion across stations. Refinery-specific costs, which have been ignored in the literature due to using local data sets within the USA, contribute up to another 33 % to the price dispersion. While state taxes explain about 12 % of the price dispersion, spatial factors such as local agglomeration externalities, land prices, and distribution costs of gasoline explain up to about 4 %. The contribution of brand-specific factors is relatively minor.

Suggested Citation

  • Demet Yilmazkuday & Hakan Yilmazkuday, 2016. "Understanding gasoline price dispersion," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 57(1), pages 223-252, July.
    • Handle: RePEc:spr:anresc:v:57:y:2016:i:1:d:10.1007_s00168-016-0775-4
    DOI: 10.1007/s00168-016-0775-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00168-016-0775-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00168-016-0775-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gerhard Clemenz & Klaus Gugler, 2009. "Locational choice and price competition: some empirical results for the austrian retail gasoline market," Studies in Empirical Economics, in: Giuseppe Arbia & Badi H. Baltagi (ed.), Spatial Econometrics, pages 223-244, Springer.
    2. David P. Byrne, Gordon W. Leslie, and Roger Ware, 2015. "How do Consumers Respond to Gasoline Price Cycles?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Christopher L. Foote & Jane Sneddon Little, 2011. "Oil and the macroeconomy in a changing world: a conference summary," Public Policy Discussion Paper 11-3, Federal Reserve Bank of Boston.
    4. Lutz Kilian, 2010. "Explaining Fluctuations in Gasoline Prices: A Joint Model of the Global Crude Oil Market and the U.S. Retail Gasoline Market," The Energy Journal, , vol. 31(2), pages 87-112, April.
    5. 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.
    6. Jean-Francois Houde, 2012. "Spatial Differentiation and Vertical Mergers in Retail Markets for Gasoline," American Economic Review, American Economic Association, vol. 102(5), pages 2147-2182, August.
    7. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    8. Dieter Pennerstorfer, 2009. "Spatial price competition in retail gasoline markets: evidence from Austria," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 133-158, March.
    9. Andrew Eckert, 2013. "Empirical Studies Of Gasoline Retailing: A Guide To The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 140-166, February.
    10. Manuszak, Mark D., 2010. "Predicting the impact of upstream mergers on downstream markets with an application to the retail gasoline industry," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 99-111, January.
    11. Benjamin Atkinson, 2008. "On Retail Gasoline Pricing Websites: Potential Sample Selection Biases and Their Implications for Empirical Research," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(2), pages 161-175, September.
    12. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    13. Barron, John M. & Taylor, Beck A. & Umbeck, John R., 2004. "Number of sellers, average prices, and price dispersion," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1041-1066, November.
    14. Doyle Jr., Joseph J. & Samphantharak, Krislert, 2008. "$2.00 Gas! Studying the effects of a gas tax moratorium," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 869-884, April.
    15. Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June.
    16. Chouinard Hayley H & Perloff Jeffrey M, 2007. "Gasoline Price Differences: Taxes, Pollution Regulations, Mergers, Market Power, and Market Conditions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-28, January.
    17. Hosken, Daniel S. & McMillan, Robert S. & Taylor, Christopher T., 2008. "Retail gasoline pricing: What do we know?," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1425-1436, November.
    18. Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 305-339.
    19. Eckert, Andrew & West, Douglas S., 2005. "Price uniformity and competition in a retail gasoline market," Journal of Economic Behavior & Organization, Elsevier, vol. 56(2), pages 219-237, February.
    20. Sutton, Paul C. & Costanza, Robert, 2002. "Global estimates of market and non-market values derived from nighttime satellite imagery, land cover, and ecosystem service valuation," Ecological Economics, Elsevier, vol. 41(3), pages 509-527, June.
    21. Andrew Eckert & Douglas S. West, 2004. "A tale of two cities: Price uniformity and price volatility in gasoline retailing," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 38(1), pages 25-46, March.
    22. Ambarish Chandra & Mariano Tappata, 2011. "Consumer search and dynamic price dispersion: an application to gasoline markets," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 681-704, December.
    23. Doll, Christopher N.H. & Muller, Jan-Peter & Morley, Jeremy G., 2006. "Mapping regional economic activity from night-time light satellite imagery," Ecological Economics, Elsevier, vol. 57(1), pages 75-92, April.
    24. Xiaoming Ning & Robert Haining, 2003. "Spatial Pricing in Interdependent Markets: A Case Study of Petrol Retailing in Sheffield," Environment and Planning A, , vol. 35(12), pages 2131-2159, December.
    25. Sen, Anindya, 2003. "Higher prices at Canadian gas pumps: international crude oil prices or local market concentration? An empirical investigation," Energy Economics, Elsevier, vol. 25(3), pages 269-288, May.
    26. Edelstein, Paul & Kilian, Lutz, 2009. "How sensitive are consumer expenditures to retail energy prices?," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 766-779, September.
    27. Andrea Shepard, 1993. "Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 58-77, Spring.
    28. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Understanding Gasoline Price Dispersion
      by Hakan Yilmazkuday in Hakan Yilmazkuday's Blog on 2016-06-13 20:05:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Elliott, Robert & Sun, Puyang & Zhu, Tong, 2020. "Shell shocked: The impact of foreign entry on the gasoline retail market in China," Energy Economics, Elsevier, vol. 86(C).
    2. Satoh, Eiji & Iwase, Ryusuke & Kamakura, Keita & Sawasato, Shinji & Tominaga, Saki, 2018. "Consumer search costs, geographical concentration, and retail gasoline pricing: Evidence from inland Japan," Japan and the World Economy, Elsevier, vol. 45(C), pages 1-8.
    3. Demet Yilmazkuday & Hakan Yilmazkuday, 2019. "Redistributive Effects of Gasoline Prices," Networks and Spatial Economics, Springer, vol. 19(1), pages 109-124, March.
    4. Ren, Xiaohang & Lu, Zudi & Cheng, Cheng & Shi, Yukun & Shen, Jian, 2019. "On dynamic linkages of the state natural gas markets in the USA: Evidence from an empirical spatio-temporal network quantile analysis," Energy Economics, Elsevier, vol. 80(C), pages 234-252.
    5. Valadkhani, Abbas & Anwar, Sajid & Ghazanfari, Arezoo & Nguyen, Jeremy, 2021. "Are petrol retailers less responsive to changes in wholesale or crude oil prices when they face lower competition? The case of Greater Sydney," Energy Policy, Elsevier, vol. 153(C).
    6. Mark J. Holmes & Jesús Otero & Theodore Panagiotidis, 2022. "Convergence in retail gasoline prices: insights from Canadian cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(1), pages 207-228, February.
    7. Jing Xu & Alan T. Murray, 2019. "Spatial variability in retail gasoline markets," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 581-603, June.
    8. Hakan Yilmazkuday, 2021. "COVID-19 and Daily Oil Price Pass-Through," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 2(1), pages 1-6.
    9. Malloy Brandon, 2018. "The Supply Network and Price Dispersion in the Canadian Gasoline Market," Review of Network Economics, De Gruyter, vol. 17(2), pages 75-107, June.
    10. Oczkowski, Edward & Wong, Alfred & Sharma, Kishor, 2018. "The impact of major fuel retailers on regional New South Wales petrol prices," Economic Analysis and Policy, Elsevier, vol. 57(C), pages 44-59.
    11. Arezoo Ghazanfari, 2022. "What Drives Petrol Price Dispersion across Australian Cities?," Energies, MDPI, vol. 15(16), pages 1-24, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sylvain Benoît & Yannick Lucotte & Sébastien Ringuedé, 2019. "Competition and price stickiness: Evidence from the French retail gasoline market," Working Papers hal-02292332, HAL.
    2. Mariano Tappata & Jing Yan, 2017. "Competition in Retail Petrol Markets," Australian Economic Papers, Wiley Blackwell, vol. 56(3), pages 201-218, September.
    3. Frederik von Waldow & Heike Link, 2024. "Spatial Competition and Pass-through of Fuel Taxes: Evidence from a Quasi-natural Experiment in Germany," Discussion Papers of DIW Berlin 2086, DIW Berlin, German Institute for Economic Research.
    4. Michal Kvasnička, 2022. "Can we ignore spatial dependence when evaluating mergers?," Empirical Economics, Springer, vol. 62(3), pages 1323-1344, March.
    5. Nguyen-Ones, Mai & Steen, Frode, 2018. "Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?," Discussion Paper Series in Economics 6/2018, Norwegian School of Economics, Department of Economics.
    6. Michal Kvasnička & Rostislav Staněk & Ondřej Krčál, 2018. "Is the Retail Gasoline Market Local or National?," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 47-58, March.
    7. Satoh, Eiji & Iwase, Ryusuke & Kamakura, Keita & Sawasato, Shinji & Tominaga, Saki, 2018. "Consumer search costs, geographical concentration, and retail gasoline pricing: Evidence from inland Japan," Japan and the World Economy, Elsevier, vol. 45(C), pages 1-8.
    8. Noel, Michael D. & Qiang, Hongjie, 2019. "The role of information in retail gasoline price dispersion," Energy Economics, Elsevier, vol. 80(C), pages 173-187.
    9. repec:dgr:rugsom:14027-eef is not listed on IDEAS
    10. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2015. "Price dispersion and station heterogeneity on German retail gasoline markets," DICE Discussion Papers 171, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Justus Haucap & Ulrich Heimeshoff & Manuel Siekmann, 2017. "Fuel Prices and Station Heterogeneity on Retail Gasoline Markets," The Energy Journal, , vol. 38(6), pages 81-104, November.
    12. Firgo, Matthias & Pennerstorfer, Dieter & Weiss, Christoph R., 2015. "Centrality and pricing in spatially differentiated markets: The case of gasoline," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 81-90.
    13. Bergantino, Angela Stefania & Capozza, Claudia & Intini, Mario, 2018. "Empirical investigation of retail gasoline prices," Working Papers 18_5, SIET Società Italiana di Economia dei Trasporti e della Logistica.
    14. Nguyen-Ones , Mai & Steen, Frode, 2018. "Market Power in Retail Gasoline Markets," Discussion Paper Series in Economics 21/2019, Norwegian School of Economics, Department of Economics, revised 01 Jul 2019.
    15. Koh, Kanghyok & Jeon, Sungho & Lee, Jinhyuk, 2022. "The effects of price competition on firms' operations and market price: Evidence from a retail gasoline market," Energy Economics, Elsevier, vol. 108(C).
    16. 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.
    17. Christos Genakos & Mario Pagliero, 2022. "Competition and Pass-Through: Evidence from Isolated Markets," American Economic Journal: Applied Economics, American Economic Association, vol. 14(4), pages 35-57, October.
    18. Jing Xu & Alan T. Murray, 2019. "Spatial variability in retail gasoline markets," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 581-603, June.
    19. Alderighi, Marco & Baudino, Marco, 2015. "The pricing behavior of Italian gas stations: Some evidence from the Cuneo retail fuel market," Energy Economics, Elsevier, vol. 50(C), pages 33-46.
    20. 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).
    21. David P. Byrne, Gordon W. Leslie, and Roger Ware, 2015. "How do Consumers Respond to Gasoline Price Cycles?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:anresc:v:57:y:2016:i:1:d:10.1007_s00168-016-0775-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.