oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases this paper analyzes the effect of volatility in oil prices on the degree of asymmetry in the response of gasoline prices to oil price increases and decreases several time series measures of the asymmetry between the responses of gasoline prices to oil price increases and decreases and several measures of the oil price volatility are constructed in all models the degree of asymmetry in gasoline prices declines with an increase in oil price volatility the results support the oligopolistic coordination theory as a likely explanation of the observed asymmetry and are not consistent with the standard search theory and the search theory with bayesian updating

price discrimination copyright law and technological innovation evidence from the introduction of dvds u s copyright law effectively prevents direct price discrimination for copyright holders that sell to different markets in response these firms can engage in indirect price discrimination i derive theoretical predictions about the use of indirect price discrimination and i analyze how optimal pricing strategies differ for different products using data on vhs and dvd movie distribution i find that firms pricing choices are consistent with the predictions of theory and that firms use of indirect price discrimination benefits consumers but harms ancillary retailers finally i examine what optimal pricing strategies might look like in a legal environment that permits direct price discrimination

retail fuel price adjustment in germany a threshold cointegration approach abstract consumers in germany often complain that retail fuel prices usually adjust quickly to crude oil price increases than decreases and characterize this pricing pattern as market power exploitation in this paper we use both weekly national and daily city specific berlin hamburg munich and cologne data to investigate the extent to which retail fuel prices in germany adjust to changes in the international crude oil price at the national level with weekly prices we find positive asymmetries for both gasoline and diesel within the period 2003 2007 reflecting that retail prices react more swiftly to crude oil price increases than decreases in contrast for 2009 2013 we observe symmetric adjustment and negative asymmetry for retail diesel and gasoline prices respectively the city level analysis supports our findings in the latter time period thus regulatory measures aimed at the retail fuel market over recent years seem to have been effective and contrary to consumers perception we find no evidence for excessive market power or collusion

asymmetric price adjustments a supply side approach using a model of dynamic price competition we provide an explanation from the supply side for the well established observation that output prices react faster in response to input cost increases than to decreases when costs decline the opportunity of profitable storing in anticipation of higher future costs allows competitive firms to coordinate on prices above current marginal costs the initial price response is only partial and profitable storing relaxes competition conversely when costs rise storing is not beneficial in anticipation of lower future costs and firms immediately adjust their prices to current marginal costs which entails the standard bertrand outcome our results shed new light on the empirical evidence about asymmetric pricing and can stimulate further empirical investigation on this puzzle

testing for asymmetric pricing in the canadian retail gasoline market abstract this paper applies a threshold regression model to test for asymmetric pricing in the retail gasoline market in canada using weekly data for the period january 1990 to december 1996 we present results for 13 canadian cities for both premium and regular gasoline within the context of an error correction model we test for the presence of asymmetric price behaviour using average changes in crude prices as well as various lags for the change in crude as possible thresholds we are unable to find any evidence to support this view

brand specific tastes for quality this paper develops a model of nonlinear pricing with competition the novel ele ment is that each consumer s willingness to pay for quality is private information and is allowed to dier across brands the consumer s preferences are represented by a multidimensional type containing the marginal value of quality for dierent products buyers with high willingness to pay for quality also display strong preferences for par ticular brands and require higher discounts in order to switch away from their favorite product therefore competition is ercer for buyers with lower tastes for quality and hence more elastic demands this is in sharp contrast to earlier models in which com petition is ercer for higher taste more valuable buyers in equilibrium rms either compete intensively for the entire market providing strictly positive rents to all con sumers or shut down the least pro table segment of the market quality levels are distorted downwards for all buyers except for those with the highest type the number of competing rms and the degree of correlation across brand preferences enhance the e ciency of the allocation

rockets and feathers the asymmetric speed of adjustment of uk retail gasoline prices to cost changes abstract the paper develops a quadratic quantity adjustment model to test the hypothesis put forward in the recent monopolies and mergers commission report that the speed of adjustment of uk retail gasoline prices to cost changes is more rapid when costs rise than when they fall and that the adjustment path is more concentrated around the mean value on the upswing using data from 1982 to 1989 evidence of faster and more concentrated responses to cost increases were found

cointegration and threshold adjustment this article proposes an extension to the engle granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways we demonstrate that our test has good power and size properties over the engle granger test when there are asymmetric departures from equilibrium we consider an application namely whether there exists cointegration among interest rates for instruments with different maturities this issue has been widely tested with mixed results we argue that either cautious policy or possibly opportunistic behavior on the part of the federal reserve implies that an equilibrium relationship between short and long term interest rates exists but that adjustments from disequilibrium are asymmetric in nature empirical tests using u s yields confirm the asymmetric nature of error correction among interest rates of different maturities

new products quality changes and welfare measures computed from estimated demand systems this paper examines the construction of a price index based on an estimated demand system in principle the method examined can produce a price index that takes account of the introduction of new p

cellular telephone new products and the cpi since their introduction in 1983 cellular telephones adoption has grown at 25 35 per year at year end 1997 about 55 million cellular telephones were in use in the united states the bureau of labor statistics bls did not know that cellular telephones existed at least in terms of calculating the consumer price index cpi until 1998 when they were finally included in the cpi omitting cellular telephones from the cpi created a significant bias i estimate a bias in the bls estimate of the telecommunications services index of between 8 1 9 per year because of the omission of the cellular telephone rather than telecommunications service prices increasing at about 1 1 per year the correct calculation has them decreasing at about 8 per year omission of new goods from the cpi for significant periods of time leads to important bias in the calculation of the cpi

upstream innovation and product variety in the u s home pc market this article investigates the welfare implications of the rapid innovation in central processing units cpus and asks whether it results in inefficient elimination of basic personal computer pc products i analyse a game in which firms make multiple discrete product choices and tackle challenges such as partial identification and sample selection estimation results demonstrate that the demand for pcs is highly segmented and that fixed costs consume a substantial portion of the per unit producer profit the estimated model implies that intel s introduction of its pentium m chip contributed significantly to the growth of the mobile pc segment and to consumer welfare the lion s share of the benefits to consumers was enjoyed by the 20 least price sensitive consumers i also find that the pentium m crowded out the pentium iii and pentium 4 technologies and that the benefits to consumers from keeping those older products on the shelf would have been comparable to the added fixed costs while total welfare cannot be increased by keeping older technologies on the shelf such a policy would have allowed the benefits from innovation to trickle down to price sensitive households improving their access to mobile computing

modelling how much extra motorists pay on the road a cross sectional study of profit margins of unleaded petrol in australia abstract gross profitability margin difference between retail and wholesale prices for unleaded petrol exhibits substantial variations across 108 cities towns and regional centres in australia this paper examines if such variations averaged during 2007 2012 can be explained by a transport costs proxied by the distance between retailers and wholesalers b the size of the retail market c market competition proxied by the number of cars in the vicinity of the retailers d dummy variables capturing other qualitative attributes associated with the retailers locations three cross sectional regressions are estimated but only one successfully passes all diagnostic tests by identifying a number of locations exhibiting excessive profit margins the results of this paper enhance the efficiency and transparency of petrol pricing in the retail market it is found that the extent of excessive profiteering in western australia wa and south australia sa were lower than other australian states and territories this important finding can be explained by a strong presence of independent petrol stations in sa and the successful price monitoring performance of fuelwatch in wa

a constructive approach to estimating pure characteristics demand models with pricing discrete choice demand models are important and fundamental tools for understanding consumers choice behavior and for analyzing firms operations and pricing strategies in these models products are often described as a vector of observed characteristics a consumer chooses the product that maximizes her utility assumed to be a function of the observed product characteristics and the consumer s preference over these product characteristics one central task in the demand estimation literature is to infer based on observed data consumers preferences on product characteristics we consider such an estimation problem for pure characteristics models a class of random coefficients demand models without the idiosyncratic logit error term in a consumer s utility function the absence of the logit error term and the use of numerical integration to approximate the integral in aggregate market shares lead to a nonsmooth formulation of approximated market share equations as a result solving the approximated

coverage of retail stores and discrete choice models of demand estimating price elasticities and welfare effects consumers choice set of products within stores can be limited ackerberg and rysman 2005 address this problem by modeling unobserved consumer preferences over products and retail stores leading to augmented demand speci cations having carbonated soft drink product level data where we observe products store coverage we are able to estimate their logit nested logit and random coe cient logit speci cations of demand in a structural model of equilibrium allowing for store coverage turns out to have a very signi cant impact on the estimated structural parameters and on the predictive power of the model taking these estimated structural parameters we perform a counterfactual whereby stores carry all products in the market we nd systematic increases in price elasticities and welfare in our new equilibrium competition in markets is more curtailed than normally assumed in structural models of industries

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

do gasoline prices respond asymmetrically to crude oil price changes the authors test and confirm that retail gasoline prices respond more quickly to increases than to decreases in crude oil prices among the possible sources of this asymmetry are production inventory adjustment lags and market power of some sellers by analyzing price transmission at different points in the distribution chain the authors attempt to shed light on these theories spot prices for generic gasoline show asymmetry in responding to crude oil price changes which may reflect inventory adjustment effects asymmetry also appears in the response of retail prices to wholesale price changes possibly indicating short run market power among retailers

asymmetric size dependent effects of the output gap on inflation us evidence from the last half a century this article examines asymmetric size and sign dependent effects of the output gap on the us quarterly inflation rate using data from the last half a century 1959q2 2013q1 consistent with previous studies it is found that the consumer price index is cointegrated with the unit labour cost and the price of oil a short run dynamic model is then estimated in which variations in the output gap are divided into three groups large positive large negative and small medium positive negative the results provide convincing evidence that only sufficiently large positive or negative variations of the output gap can significantly influence inflation put otherwise relatively small to medium changes in the output gap exert no significant impact on inflation and if not separated they can somewhat obscure the significant effects associated with large variations of the output gap this study can lead to greater consensus on the inflation output gap nexus the findings remain robust despite the use of differen

petrol prices and subjective wellbeing abstract we examine the effect of petrol prices on subjective wellbeing swb using household panel data to do so we use 17 waves of the household income and labour dynamics in australia hilda survey based on our preferred instrumental variable estimates we find that a standard deviation increase in petrol prices leads to a decline of 0 0157 0 0245 standard deviations in swb the finding that increases in petrol prices significantly lower swb is robust to alternative measures of wellbeing and alternative ways of addressing endogeneity as well as employing different sources of fuel price data measured at a range of frequencies we also examine the channels through which petrol prices influence swb and find that maintaining social networks is an important way through which petrol prices influence swb

a threshold cointegration analysis of asymmetric price transmission from crude oil to gasoline prices abstract this study provides new supportive evidence for asymmetric adjustment in u s retail gasoline prices the asymmetric transmission is found to occur not just through the spot markets of crude oil and refinery gasoline but also through their future markets further evidence also shows that the observed asymmetry in price transmission primarily occurs downstream not upstream of the transmission process

estimation of random coefficient demand models two empiricists perspective we document the numerical challenges we experienced estimating random coefficient demand models as in berry levinsohn and pakes 1995 using two well known data sets and a thorough optimization design the optimization algorithms often converge at points where the first and second order optimality conditions fail there are also cases of convergence at local optima on convergence the variation in the values of the parameter estimates translates into variation in the models economic predictions price elasticities and changes in consumer and producer welfare following hypothetical merger exercises vary at least by a factor of 2 and up to a factor of 5

competition and collusion in the american automobile industry the 1955 price war movements in total quantity and in quality adjusted price suggest a supply side shock in the american automobile market in 1955 this paper tests the hypothesis that the shock was a transitory change in industry conduct a price war the key ingredients of the test are alternative equilibrium models of oligopoly under product differentiation in nonnested cox tests of hypotheses a collusive solution is sustained in 1954 and in 1956 while a competitive solution holds in 1955 the result does not appear to be an artifact since it is robust in tests against alternative specifications copyright 1987 by blackwell publishing ltd

do gasoline prices exhibit asymmetry not usually previous studies have found evidence of asymmetric price adjustment in u s retail gasoline prices in that gasoline prices rise more rapidly in response to a cost increase than fall in response to a cost decrease by estimating a threshold cointegration model that allows for multiple regimes i am able to test how sensitive this result is to outlying observations in contrast to previous studies i find little evidence of asymmetry for the vast majority of observations and that the asymmetry is being driven by a small number of outlying observations

measuring consumerwelfareinthe cpu market anapplication of the pure characteristics demand model in this article i estimate demand for the personal computer central processing unit and measure consumer welfare using the pure characteristics demand model the model is based on a quasilinear utility function with multiplicative random variables and does not have the idiosyncratic logit error term so that consumer welfare directly reflects consumers valuation of product characteristics welfare calculations show that consumer surplus comprises approximately 90 of total social surplus and that large welfare gains have resulted from the introduction of new products

is there an asymmetry in the response of diesel and petrol prices to crude oil price changes evidence from new zealand this paper examines how pre tax petrol and diesel prices in new zealand respond to changes in crude oil prices using an asymmetric error correction model our results show that oil companies adjust diesel prices upwards faster than they adjust them downwards and the difference is statistically significant however we find no statistical evidence for an asymmetry in the adjustment of petrol prices even though the magnitude of estimated coefficients suggests a faster response to rising prices as diesel pricing is not as competitive as petrol pricing calls for further government actions and monitoring of the oil market may be justified our findings also have important implications for the conduct of monetary policy as the pass through of crude oil price changes can affect cost push inflation

idiosyncrasies in australian petrol price behaviour evidence of seasonalities it has been argued that there are certain idiosyncrasies in australian petrol price behaviour to the extent that these idiosyncrasies result in large magnitude differences in petrol prices they may be exploited by consumers to significantly reduce their household expenditure on the product similarly such seasonalities may influence retailers in their purchase and storage decision the objective of this paper is to test for seasonalities in the australian retail petrol market the approach adopted is similar to that for determining calendar anomalies as documented in the financial and commodity markets literature we find that a monthly seasonal effect is pronounced with petrol prices lower in the months of february may and highest in july and august a day of the week effect is also apparent and is manifest in all petrol prices for capital cities adelaide brisbane melbourne and sydney across various years however the half month effect as is common in stock returns is not observed moreover contrary to popular belief that petrol prices are higher surrounding holidays no evidence of the holiday effect is found in brisbane and melbourne petrol prices also have some relationship to the mood of consumers as proxied using weather conditions this is not observed in adelaide and sydney

untangling supply and demand in occupational choice in this paper we present an econometric framework for modeling occupational choice that allows us to separately and simultaneously model supply side and demand side influences whilst allowing for potential ordering with regard to skill levels across occupations

asymmetry in retail gasoline and crude oil price movements in the united states an application of hidden cointegration technique abstract there is a common belief that gasoline prices respond more quickly to crude oil price increases than decreases some economists and politicians believe that asymmetry in oil and gasoline price movements is the outcome of a non competitive gasoline market requiring that governments take policy action to address unfair pricing there is no consensus as to the existence or nature of the asymmetric relationship between prices of gasoline and crude oil much of this literature specifies asymmetry in the speed of adjustment and short run adjustment coefficients in contrast granger and yoon s granger c w and yoon g hidden cointegration university of california san diego department of economics working paper 2002 crouching error correction model cecm identifies asymmetry of the cointegrating vectors between components cumulative positive and negative changes of the series applying the cecm to retail gasoline and crude oil prices for the u s we find that there is only evidence of cointegration between positive components of crude oil prices and negative components of gasoline prices in contrast to the literature which attributes asymmetric price movements to market power of refiners these findings suggest that gasoline prices in the long run are more influenced by the technological changes on the demand side than crude oil price movements on the supply side

asymmetric responses in the timing and magnitude of changes in australian monthly petrol prices to daily oil price changes abstract this article investigates whether uncompetitive pricing tactics are being employed in the retail petrol market in australia through examining the effect of a change in daily oil prices on monthly petrol prices to do so we incorporate asymmetry into the coefficients of a normalised beta weighting function within an asymmetric mixed data sampling amidas framework this enables us to examine both the timing and the lagged marginal effects of a change in retail petrol prices in response to a change in the oil price we find evidence of asymmetries in both the timing and magnitude of retail petrol prices to a change in the oil price specifically we find that while price falls are slowly and symmetrically passed onto consumers price increases are more delayed but higher in intensity over time depending on the capital city when retailers eventually do increase petrol prices in response to an oil price rise with delay the price rise is between 2 1 and 3 4 times more than when retailers reduce petrol prices in response to a fall in the price of oil this finding is consistent with retailers delaying substantial petrol price rises in order to mask the existence of uncompetitive practices

testing for price response asymmetries in the spanish fuel market new evidence from daily data abstract in this work we use daily data to examine pattern asymmetries in the speed of transmission of international wholesale oil prices to spanish retail fuel prices results are robust to two alternative specifications of an asymmetric error correction model for which the presence of autoregressive conditional heteroskedasticity for disturbances is modeled by a garch 1 1 process evidence indicates that the short term transmission of wholesale prices to retail prices is quite symmetric for both gasoline and diesel fuel nevertheless in contrast to some of the results provided for an earlier period we did not find asymmetries in the speed of retail price responses toward long run equilibrium our evidence also suggests that the use of weekly or lower frequency data is one of the possible explanations for some of the seemingly contradictory results concerning this issue

new evidence on asymmetric gasoline price responses in a 1997 paper borenstein cameron and gilbert bcg claim that gasoline prices rise quickly following an increase in the price of crude oil but fall slowly following a decrease this note estimates an error correction model with daily spot gasoline and crude oil price data over the period 1985 1998 and finds no evidence of asymmetry in wholesale gasoline prices the sources of the difference in results are twofold first we use the standard engle granger two step estimation procedure whereas bcg used a nonstandard estimation methodology second even using bcg s nonstandard specification the use of daily rather than weekly data yields little evidence of price asymmetry

do petrol prices rise faster than they fall when the market shows significant disequilibria abstract this paper examines if the long run relationship between retail and wholesale petrol prices is subject to adjustment asymmetric behaviour using weekly australian data 2007 2012 across 111 locations a short run dynamic model is specified in which three feedback coefficients capture three different types of disequilibria large and positive large and negative small positive negative significant evidence of asymmetric behaviour is found in 28 locations which are mainly in tasmania queensland and new south wales in these locations when prices are conspicuously above the equilibrium path retailers sluggishly lower their prices but when prices are substantially below the equilibrium values the adjustment speed is significantly faster

do petrol prices increase faster than they fall in market disequilibria abstract this paper tests the idea that petrol prices respond more quickly to price increases than to decreases we show that the results previously documented in the literature for australia are spurious due to failure to establish the stationarity property of the price series and the co integration relationship between retail and wholesale prices when neglecting to account for a regime shift in the data using a robust approach involving a threshold error correction model we find little evidence to support the contention that retail petrol price reverts asymmetrically to long run equilibrium asymmetric adjustments in retail prices are found only in four of the twenty eight retail gas stations in queensland these results cast doubt on the previously reported pervasiveness of this asymmetric price response phenomenon in australia we further caution on erroneous inference with the use of weekly rather than daily data and when failing to account for a regime shift in the data

rockets and feathers revisited an international comparison on european gasoline markets this paper re examines the issue of asymmetries in the transmission of shocks to crude oil prices onto the retail price of gasoline relative to the previous literature the distinguishing features of the present paper are i use of updated and comparable data to carry out an international comparison of gasoline markets ii two stage modeling of the transmission of oil price shocks to gasoline prices first refinery stage and second distribution stage in order to assess possible asymmetries at either one or both stages iii use of asymmetric error correction models to distinguish between asymmetries that arise from short run deviations in input prices and from the speed at which the gasoline price reverts to its long run level iv explicit possibly asymmetric role of the exchange rate as crude oil is paid for in dollars whereas gasoline sells for different sums of national currencies v bootstrapping of f tests of asymmetries in order to overcome the lowpower problem of conventional testing procedures in contrast to several previous findings the results generally point to widespread differences in both adjustment speeds and short run responses when input prices rise or fall

retail price asymmetries in local gasoline markets the experience of the salt lake city retail gasoline market during the 1989 to 1993 period suggests that there was asymmetric adjustment wholesale and retail price data unique to the salt lake market are used to test for the existence of three types of price asymmetry during this period with respect to the magnitude of the pass through of wholesale price changes evidence of price asymmetry during periods of average weekly wholesale price changes is found however during market shocks the evidence points in the direction of retail price symmetry evidence of asymmetry with respect to the timing and pattern of the retail price response is found for periods of both average and market shock changes since gasoline is purchased by the consumer in local markets conclusions reached by studies of market pricing behaviour that rely on national data may not be relevant for local policy decisions this appears to be the case for the salt lake city market

seasonal patterns in daily prices of unleaded petrol across australia abstract this study addresses a very significant policy issue not previously examined at a disaggregated level for australia by identifying on which day s petrol is more expensive and in which locations discount days are non existent after conducting a time series analysis of the day of the week effect in retail prices of unleaded petrol in 114 locations across australia jan 2005 to apr 2012 it is observed that prices mostly peak on thursday friday and then decline until they hit their cyclical trough mainly on sunday tuesday however these daily differences are only statistically significant in capital cities or large regional centres a cross sectional analysis of the mean prices during the period nov 2007 to feb 2012 shows that a in remote and less populous locations where sales are presumably limited and overhead costs are high petrol is more expensive b petrol generally costs more in places which exhibit less price variability the disaggregated and location specific results can increase our understanding of australia s retail petrol market and can be beneficial to motorists as well as various government and non government organisations such as the accc australian competition and consumer commission aaa australian automobile association and fuelwatch

why are prices sticky the dynamics of wholesale gasoline prices the menu cost interpretation of sticky prices implies that the probability of a price change should depend on the past history of prices and fundamentals only through the gap between the current price and the frictionless price we find that this prediction is broadly consistent with the behavior of nine philadelphia gasoline wholesalers nevertheless we reject the menu cost model as a literal description of these firms behavior arguing instead that price stickiness arises from strategic considerations of how customers and competitors will react to price changes

a discrete choice model for ordered alternatives a generalization of the multinomial logit mnl model is developed for cases where discrete alternatives are ordered by allowing stochastic correlation among alternatives in close proximity the model belongs to the generalized extreme value class and is therefore consistent with random utility maximization an extension can handle cases where observations have been selected from a truncated choice set a two stage procedure using mnl computer software provides a specification test for mnl against the proposed model two empirical applications are briefly described copyright 1987 by the econometric society

rockets and feathers meet markup margins applications to the oil and gasoline industry this article investigates the existence of asymmetric price transmission between crude oil rack wholesale and retail gasoline prices a threshold cointegration technique is used with regime switches being triggered by the size of the markup margin there is consistent evidence of band tar in which the crude rack and retail prices are free to diverge until the markup margin is squeezed or stretched beyond a lower or upper critical threshold this finding indicates that abnormally high markup margins cannot be sustained which provides evidence against market power exertion the threshold error correction models indicate that there is no systematic relationship between the speed of adjustment back to the long run relationship and the markup margin which rules out the existence of rockets and feathers

price asymmetry in the dutch retail gasoline market abstract this article analyses the retail price adjustments in the dutch gasoline market we estimate an asymmetric error correction model on weekly price changes for the years 1996 2001 we construct five datasets one for each working day the conclusions on asymmetric pricing are shown to differ over these datasets suggesting that the choice of the day for which the prices are observed matters more than commonly believed in our view the insufficient robustness of the outcomes might explain the mixed conclusions found in the literature using these two approaches we also show that the effect of asymmetry on the dutch consumer costs is negligible