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Price Cycles and Price Leadership in Gasoline Markets: New Evidence from Canada

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  • David P.Byrne
  • Roger Ware

Abstract

This paper studies the determinants of Edgeworth Cycles, price leadership and coordination in retail gasoline markets using daily station-level price data for 110 markets in Ontario, Canada for 2007-2008. We find an “inverse-U” relationship between markets’ propensity to exhibit price cycles and their size. More concentrated markets are less likely to exhibits cycles and we highlight regional clustering among cycling and non-cycling markets. Within cycling markets, we find brands’ stations (Esso, Shell,Petro-Canada, Sunoco) lead price jumps and coordinate market prices, while independents (Ultramar, Pioneer, Olco, MacEwen) aggressively undercut prices over the cycle.

Suggested Citation

  • David P.Byrne & Roger Ware, 2011. "Price Cycles and Price Leadership in Gasoline Markets: New Evidence from Canada," Department of Economics - Working Papers Series 1124, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1124
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0007/784267/1124.pdf
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Benjamin Atkinson, Andrew Eckert, and Douglas S. West, 2014. "Daily Price Cycles and Constant Margins: Recent Events in Canadian Gasoline Retailing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    3. Isakower, Sean & Wang, Zhongmin, 2014. "A comparison of regular price cycles in gasoline and liquefied petroleum gas," Energy Economics, Elsevier, vol. 45(C), pages 445-454.

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    More about this item

    Keywords

    Retail gasoline prices; Edgeworth Cycles; Price leadership; Coordination;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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