nach oben

Review of Industrial Organization

Erschienen in:

01.05.2013

Edgeworth Price Cycles in Gasoline: Evidence from the United States

verfasst von: Paul R. Zimmerman, John M. Yun, Christopher T. Taylor

Erschienen in: Review of Industrial Organization | Ausgabe 3/2013

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

Studies of gasoline prices in multiple countries have found sequences of a sharp price increase followed by gradual decreases. This pattern is linked to Maskin and Tirole (Econometrica 56:571–599, 1988) duopoly pricing game and labeled Edgeworth price cycles. We examine data on average daily MSA-level retail gasoline prices for 350 MSAs in the US from 1996–2010. We confirm the finding of others and show that a relatively small number of US MSAs in contiguous upper Midwestern states evidence price cycling. However, our lengthy data set allows us to see that these MSAs began cycling in 2000. Thus, we can examine prices in cycling and non-cycling MSAs before and after cycling and find that prices are lower in MSAs that began cycling.

Vorheriger Artikel Countervailing Power and Chain Stores

Nächster Artikel The Impact of Timing on Bidding Behavior in Procurement Auctions of Contracts with Private Costs

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

A measure of the gross retail margin is the difference between the refiner sale price of gasoline for resale and the price to end users. In 2010 this difference was 13.5 cents per gallon. This is an overestimate of the net retail margin since storage and delivery are not included in this price. See http://www.eia.gov/dnav/pet/pet_pri_refoth_dcu_nus_a.htm.

See Allvine and Patterson (1974) and Castanias and Johnson (1993).

These are gasoline stations that are not affiliated with major brands.

When a border splits an MSA, there is a separate observation for each state: e.g., Louisville, Kentucky, and Louisville, Indiana. We will refer to each MSA, state observation separately. The data are 7 days a week except from September 2000 through December 2001 where there are only observations on week days. We do a sensitivity analysis on Table 4 column (8) where we drop the 5-day-a-week data.

Similarly, Eckert (2003) counts the number of first differences in retail prices that are equal to zero, where MSAs with a relatively low count of zeros are price cycle MSAs.

See the discussion of Table 2 below for details on the identification of the start of price cycling.

See the Appendix for further details on the Markov switching model.

The Markov model identifies three MSAs as cycling at the 5 % level and seven at the 10 % level that are not listed on Table 2. At the 5 % level, these MSAs are Des Moines, IA; Santa Fe, NM; and Charleston, WV. At the 10 % level, the MSAs are Brownsville, TX; Columbus, AL; Corpus Christie, TX; Huntington-Ashland, OH; Joplin, MO; McAllen-Edinburg-Mission, TX; and Tulsa, OK.

For information about the summer of 2000 Midwest gasoline spike, see Bulow et al. (2003). For information on the two price spikes in 2001, see Platt’s Oilgram News, “Gasoline Climbs Anew on Wood River Fire,” vol. 79, no. 83, p. 4, May 1, 2001, and “Citgo Seeks EPA Waiver on Midwest ‘Gas’,” vol. 79, no. 166, p. 1, August 28, 2001.

This price deflator data as well as a description of the data series is available at http://research.stlouisfed.org/fred2/data/PCECTPI.txt (accessed on 4/18/21).

The OLS models are implemented in STATA using XTREG with the cluster option. The models with a common autocorrelation term are implemented with XTREGAR. The model that allows the autocorrelation to differ by MSA was implemented using XTGLS.

All of the other specifications that are presented on Table 4 use the \(-\)0.5 cut off. We have estimated all of the additional models on Table 4 using the lower threshold for cycling, and the results only changed by tenths of a cent.

SSA was a subsidiary of Marathon/Ashland petroleum and was formed when Marathon and Ashland merged in 1998. SSA is now a subsidiary of Marathon Petroleum. For a discussion of the assets that were involved in the Marathon and Ashland joint venture, see Taylor and Hosken (2007).

For a history of QuikTrip see http://www.quiktrip.com/Who-is-QT/History (accessed January 11, 2012).

For a description of the transaction see http://www.marathon.com/content/includes/AJAXtwister.asp?type=newsRelease&id=1479644 (accessed January 17, 2012).

Oil Price Information Service, “St. Louis Retail Station Owners Sue QuikTrip for ‘Predatory Pricing’,” OPIS Alert, December 2, 2011.

See FTC (2004). For a discussion of sizeable petroleum mergers, see pp. 35–59. For data on wholesale supply and brand level concentration by state, see pp. 243–246.

See “BPvsSpeedway: a battle of turf” http://www.enquirer.com/editions/2001/07/29/loc_price_wars_fierce_at.html (accessed January 17, 2012).

For more information on these outages, see footnote 9.

As noted by (Neftçi (1984), p. 314), this procedure can handle nonstationarity in the underlying data (i.e., \(p_t )\) given that the implied \(I_t \) will often be plausibly stationary even when the former is not.

See Neftçi (1984, pp. 326–327).

Several studies that use a smaller number of observations than we do have shown that estimating the initial condition along with the transition probabilities does not affect the magnitude of the latter when they are estimated alone; see, e.g., Falk (1986) and McQueen and Thorley (1991). Treating \(\pi _0 \) as a nuisance parameter reduces the computation burden of estimating the transition probabilities (Rothman 2008).

(McQueen and Thorley (1991), p. 243).

See Neftçi (1984, pp. 315–318) for the formula that is used to construct the confidence ellipsoid and further discussion of this test.

Allvine, F. C., & Patterson, J. M. (1974). Highway robbery: An analysis of the gasoline crisis. Indiana University Press, Chapter 8 and Appendix.

Atkinson, B. (2009). Retail gasoline price cycles: Evidence from Guelph, Ontario using bi-hourly, station-specific retail price data. Energy Journal, 30, 85–109.

Billingsley, P. (1961). Statistical inference for Markov processes. Chicago: Chicago University Press.

Bulow, J., Fischer, J., Creswell, J., & Taylor, C. (2000). Price spike. Energy Journal, 24(3), 121–149.

Castanias, R., & Johnson, H. (1993). Gas wars: Retail gasoline price fluctuations. Review of Economics and Statistics, 75, 171–174.CrossRef

Doyle, J., Muehlegger, E., & Samphantharak, K. (2010). Edgeworth cycles revisited. Energy Economics, 32, 651–660.CrossRef

Eckert, A. (2002). Retail price cycles and response asymmetry. Canadian Journal of Economics, 35, 52–77.CrossRef

Eckert, A. (2003). Retail price cycles and the presence of small firms. International Journal of Industrial Organization, 21, 151–170.CrossRef

Eckert, A., & West, D. S. (2004). Retail gasoline price cycles across spatially dispersed gasoline stations. Journal of Law and Economics, 47, 245–273.CrossRef

Erutku, C., & Hildebrand, V. A. (2010). Conspiracy at the pump. Journal of Law and Economics, 53, 223–237.CrossRef

Falk, B. (1986). Further evidence on the asymmetric behavior of economic time series over the business cycle. Journal of Political Economy, 5, 1096–1109.CrossRef

Federal Trade Commission. (2004). The petroleum industry: Mergers, structural change, and antitrust enforcement.

Lewis, M. (2009). Temporary wholesale gasoline price spikes have long-lasting retail effects: The aftermath of Hurricane Rita. Journal of Law and Economics, 52, 581–605.CrossRef

Lewis, M. (2012). Price leadership and coordination in retail gasoline markets with price cycles. International Journal of Industrial Organization, 30(4), 342–351.CrossRef

Lewis, M., & Noel, M. (2011). The speed of gasoline price response in markets with and without edgeworth cycles. Review of Economics and Statistics, 93(2), 672–682.CrossRef

Maskin, E., & Tirole, J. (1988). A theory of dynamic oligopoly, II: Price competition, kinked demand curves, and edgeworth cycles. Econometrica, 56, 571–599.CrossRef

McQueen, G., & Thorley, S. (1991). Are stock returns predictable? A test using Markov chains. Journal of Finance, 46, 239–263.CrossRef

Neftçi, S. N. (1984). Are economic time series asymmetric over the business cycle? Journal of Political Economy, 2, 307–328.CrossRef

Noel, M. D. (2007a). Edgeworth price cycles: Evidence from the Toronto retail gasoline market. Journal of Industrial Economics, 55, 69–92.CrossRef

Noel, M. D. (2007b). Edgeworth price cycles, cost-based pricing, and sticky pricing in retail gasoline markets. Review of Economics and Statistics, 89, 324–334.CrossRef

Noel, M. D. (2008). Edgeworth cycles and focal prices: computational dynamic Markov equilibria. Journal of Economics and Management Strategy, 17, 345–377.CrossRef

Noel, M. D. (2009). Do retail gasoline prices respond asymmetrically to cost shocks? The influence of edgeworth cycles. RAND Journal of Economics, 40, 582–595.CrossRef

Noel, M. D. (2012). Edgeworth cycles and intertemporal price discrimination. Energy Economics, 34(4), 942–954.

Rothman, P. (2008). Reconsideration of the Markov chain evidence on unemployment rate asymmetry. Studies in Non-Linear Dynamics and Econometrics, 12(3). Retrieved September 21, 2012 from http://www.bepress.com/snde/.

Sichel, D. E. (1989). Are business cycles asymmetric? A correction. Journal of Political Economy, 5, 1255–1260.CrossRef

Taylor, C. T., & Hosken, D. S. (2007). The economic effects of the Marathon Ashland joint venture: The importance of industry supply shocks and vertical market structure. Journal of Industrial Economics, 55(3), 419–451.CrossRef

Wang, Z. (2008). Collusive communication and pricing coordination in a retail gasoline market. Review of Industrial Organization, 32, 35–52.CrossRef

Wang, Z. (2009). (Mixed) strategy timing and oligopoly pricing: Evidence from a repeated game in a timing-controlled gasoline market. Journal of Political Economy, 117, 987–1030.CrossRef

Titel: Edgeworth Price Cycles in Gasoline: Evidence from the United States
verfasst von: Paul R. Zimmerman
John M. Yun
Christopher T. Taylor
Publikationsdatum: 01.05.2013
Verlag: Springer US
Erschienen in: Review of Industrial Organization / Ausgabe 3/2013
Print ISSN: 0889-938X
Elektronische ISSN: 1573-7160
DOI: https://doi.org/10.1007/s11151-012-9372-6

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft"

Springer Professional "Wirtschaft+Technik"

Weitere Artikel der Ausgabe 3/2013

Employment Effects of Acquisitions: Evidence from Acquired European Firms

Countervailing Power and Chain Stores

The Impact of Timing on Bidding Behavior in Procurement Auctions of Contracts with Private Costs

Consumers’ Reactions to Negative Information on Product Quality: Evidence from Scanner Data

Premium Partner