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Gasoline Prices Jump Up on Mondays: An Outcome of Aggressive Competition?

Author

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  • Oystein Foros

    (Norwegian School of Economics and Business Administration)

  • Frode Steen

    (Norwegian School of Economics and Business Administration)

Abstract

This paper examines Norwegian gasoline pump prices using daily station-specific observations from March 2003 to March 2006. Whereas studies that have analysed similar price cyclees in other countriees find support for the Edgeworth cycle theory (Maskin and Tirole, 1988), we demonstrate that Norwegian gasoline price cycles involve a form of coordinated behavior. We also show that gasline prices follow a fixed weekly pattern, with prices increasing significantly every Monday at noon, and that gasoline companies appear to use the recommended retail price as a coordination device with a fixed link between the retail and recommended prices. Moreover, the weekly pattern changed in April 2004; whereas Thursday had been the high-price day, Monday now became the high-price day. The price-cost margin also increased significantly after the weekly pattern changed in April 2004.

Suggested Citation

  • Oystein Foros & Frode Steen, 2008. "Gasoline Prices Jump Up on Mondays: An Outcome of Aggressive Competition?," Working Papers 08-20, Centre for Competition Policy, University of East Anglia.
    • Handle: RePEc:ccp:wpaper:wp08-20
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    File URL: http://www.ccp.uea.ac.uk/publicfiles/workingpapers/CCP08-20.pdf
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    Cited by:

    1. Nicolas de Roos & Vladimir Smirnov, 2020. "Collusion with intertemporal price dispersion," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 158-188, March.
    2. Steen, Frode & Foros, Øystein, 2008. "Gasoline prices jump up on Mondays: An outcome of aggressive competition?," CEPR Discussion Papers 6783, C.E.P.R. Discussion Papers.
    3. Miguel A. Fonseca & Hans-Theo Normann, 2013. "Excess Capacity and Pricing in Bertrand-Edgeworth Markets: Experimental Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(2), pages 199-228, June.
    4. Anderson, Edward, 2011. "A new model for cycles in retail petrol prices," European Journal of Operational Research, Elsevier, vol. 210(2), pages 436-447, April.
    5. Dewenter, Ralf & Linder, Melissa & Schwalbe, Ulrich, 2017. "Preiszyklen im Kraftstoffmarkt - Wettbewerb oder Kollusives Verhalten?," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168246, Verein für Socialpolitik / German Economic Association.
    6. Nicolas de Roos & Hajime Katayama, 2013. "Gasoline Price Cycles Under Discrete Time Pricing," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 175-193, June.
    7. Noel, Michael D., 2012. "Edgeworth Price Cycles and intertemporal price discrimination," Energy Economics, Elsevier, vol. 34(4), pages 942-954.
    8. David P. Byrne, 2012. "Petrol Price Cycles," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 45(4), pages 497-506, December.
    9. Perdiguero, Jordi & Jiménez, Juan Luis, 2021. "Price coordination in the Spanish oil market: The monday effect," Energy Policy, Elsevier, vol. 149(C).
    10. Siekmann, Manuel, 2017. "Characteristics, causes, and price effects: Empirical evidence of intraday Edgeworth cycles," DICE Discussion Papers 252, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Noel, Michael D., 2015. "Do Edgeworth price cycles lead to higher or lower prices?," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 81-93.
    12. Riemer P. Faber & Maarten C.W. Janssen, 2008. "On the Effects of Suggested Prices in Gasoline Markets," Tinbergen Institute Discussion Papers 08-116/1, Tinbergen Institute.

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    More about this item

    Keywords

    gasoline prices; coordinated behavior;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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