cointegration and market efficiency in commodities futures markets the hypothesis that futures prices are unbiased predictors of spot prices is a joint hypothesis that markets are efficient and risk premia are absent rejection of unbiasedness could be caused by the failure of either premise here cointegration techniques are used to test market efficiency while permitting the presence of risk premia five commodity markets were tested at the eight and twenty four week horizon results showed that all five were sometimes inefficient but no market was inefficient always moreover rejections of the unbiasedness hypothesis were nearly always caused by market inefficiency rather than the presence of risk premia

causes for an asymmetric relation between the price of crude oil and refined petroleum products we revisit the issue of asymmetries in the relation between the price of crude oil and refined petroleum products in the united states an econometric analysis of monthly data indicates that the asymmetric relation between the price of crude oil and motor gasoline is generated by refinery utilization rates and inventory behavior the asymmetric relation between the price of crude oil and home heating oil probably is generated by contractual arrangements between retailers and consumers together these results imply that price asymmetries may be generated by efficient markets under these conditions there is little justification for policy interventions to reduce or eliminate price asymmetries in motor gasoline and home heating oil markets

price movements and price discovery in futures and cash markets r isk transfer and price discovery are two of the major contributions of futures markets to the organization of economic activity working 1962 evans 1978 p 80 and silber 1981 risk transfer refers to hedgers using futures contracts to shift price risk to others price discovery refers to the use of futures prices for pricing cash market transactions working 1948 wiese 1978 p 87 and lake 1978 p 161 the significance of both contributions depends upon a close relationship between the prices of futures contracts and cash commodities this paper examines the characteristics of price movements in cash or spot markets and futures markets for storable commodities section ii presents an analytical model of simultaneous price dynamics which suggests that over short intervals of time the correlation of price changes is a function of the elasticity of arbitrage between the physical commodity and its counterpart futures contract greater elasticity fosters more highly correlated price changes and thereby facilitates the risk transfer function the elasticity of supply of arbitrage services is constrained by among other things storage and transaction costs thus futures contracts will not in general provide perfect risk transfer facilities over short time horizons the essence of the price discovery function of futures markets hinges on whether new information is reflected first in changed futures prices or in changed cash prices hoffman 1932 pp 258259 the model in section ii provides a framework for analyzing whether one market is dominant in terms of information flows and price discovery in section iii we develop a model based on section ii which is appropriate for estimating the lead lag relationship between cash prices and futures prices section iv presents empirical estimates of the parameters of the model for seven different storable commodities wheat corn oats frozen orange juice concentrates copper gold and silver the cost of arbitrage between cash and futures differs across these commodities for this reason we are not surprised to find inter commodity differences in the correlation of short run price changes and in the substitutability of futures contracts for cash market positions with respect to the price discovery function of futures markets we find that while futures markets dominate cash markets cash prices do not merely echo futures prices there are reverse information flows from cash markets to futures markets as well

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

the speculative efficiency hypothesis the hypothesis that forward prices are the best unbiased forecast of future spot prices is often presented in the economic and financial analysis of futures markets this paper considers the hypothesis independently of its implications for rational expectations or market efficiency and in order to stress this fact the term speculative efficiency is used to characterize the state envisaged under the hypothesis if a market is subject to efficient speculation the supply of speculative funds is infinitely elastic at the forward price that is equal to the expected future spot price the expected future spot price is a market price determined as the solution to the underlying rational expectations macroeconomic model although the paper is primarily concerned with testing this hypothesis in the foreign exchange market the methodology introduced in the paper is of general application to all futures markets this abstract was borrowed from another version of this item

the dynamics pattern of price dispersion in retail fuel markets abstract this paper empirically investigates the dynamics of price dispersion in retail fuel markets as a response to the corresponding wholesale price changes for this purpose we take advantage of a daily dataset of prices fixed by gas stations in two spanish regions it is consistently found that retail price dispersion is temporarily enlarged as a consequence of wholesale price increases while it is reduced due to decreases the presence of asymmetries in the short run dynamics is also revealed the impact of positive changes in the wholesale price is in the first days of adjustment clearly greater the dynamics pattern could be explained at least in part by the faster response of prices in the stations associated with the two vertically integrated companies that have the largest market share i e repsol and cepsa

detecting spot price forecasts in futures prices futures markets are often described as having two important social functions first they facilitate the transfer of commodity price risk and second they provide forecasts of commodity prices the evidence that futures markets transfer price risk is irrefutable however there is some debate about the markets forecasting ability in particular forecasts based on the current spot price are often as good as those based on the futures price some economists cite a failure to detect superior forecast power in futures prices as evidence of market inefficiency see e g leuthold 1974 and martin and garcia 1981 there are at least two other explanations first there may be nothing for the futures market to forecast if the current spot price equals the true expectation of the future spot price the futures market cannot provide a better forecast second a superior futures market forecast may be obscured by the unexpected component of the realized spot price the true expectation of the future spot price is unobservable one must approximate this expectation with the actual future spot price

bivariate garch estimation of the optimal commodity futures hedge six different commodities are examined using daily data over two futures contract periods cash and futures prices for all six commodities are found to be well described as martingales with near integrated garch innovations bivariate garch models of cash and futures prices are estimated for the same six commodities the optimal hedge ratio ohr is then calculated as a ratio of the conditional covariance between cash and futures to the conditional variance of futures the estimated ohrs reveal that the standard assumption of a time invariant ohr is inappropriate for each commodity the estimated ohr path appears non stationary which has important implications for hedging strategies

asymmetric error correction models for the oil gasoline price relationship abstract the existing literature on price asymmetries does not systematically investigate the sensitivity of the empirical results to the choice of a particular econometric specification this paper fills this gap by providing a detailed comparison of the three most popular models designed to describe asymmetric price behavior namely asymmetric ecm autoregressive threshold ecm and ecm with threshold cointegration each model is estimated on a common monthly data set for the gasoline markets of france germany italy spain and uk over the period 1985 2003 all models are able to capture the temporal delay in the reaction of retail prices to changes in spot gasoline and crude oil prices as well as some evidence of asymmetric behavior however the type of market and the number of countries which are characterized by asymmetric oil gasoline price relations vary across models the asymmetric ecm prescribes that long run price asymmetries are most likely to be found in the second stage of the transmission chain conversely the ecm with threshold cointegration suggests that long run price asymmetries vary across countries and markets short run price asymmetries are captured by the asymmetric ecm specification and the tar ecm the latter model suggests that all european countries are likely to be affected by asymmetries at the distribution stage while the results obtained with the asymmetric ecm are mixed

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

the market efficiency hypothesis the case of coffee and cocoa futures this study tests the market efficiency hypothesis for coffee and cocoa futures using daily data for contracts with a maturity of 2 and 6 months the hypothesis is tested sequentially the first condition is that future spot and futures prices be cointegrated if this condition is maintained market efficiency requires the cointegrating vector to support a 0 1 restriction that can be likened to an unbiasedness condition finally market efficiency imposes zero restrictions on the parameters of the variables expressed in first differences in the specification of the error correction representation of the relationship between future spot and futures prices brenner and kroner brenner r kroner k 1995 arbitrage cointegration and testing the unbiasedness hypothesis in financial markets journal of financial and quantitative analysis 30 pp 23 42 argue that the cointegration condition is rarely met in practice they attribute this outcome to potentially non stationary net cost of carry which would make the parameters of the cointegration relation unstable it is for this reason that hansen s tests hansen b e 1992 tests of parameter instability in regressions with i 1 processes journal of business and economic statistics 10 about the stability of the parameters in cointegration regressions were used to supplement more traditional cointegration tests johansen and juselius cointegration tests johansen s juselius k 1993 testing structural hypotheses in a multivariate cointegration analysis of the ppp and the uip for uk journal of econometrics 53 could not reject cointegration for all four contracts while hansen s lc test favored cointegration only for the cocoa contracts nested and non nested testing procedures were used to test the 0 1 restriction on the cointegration vector unbiasedness was found to be robust across testing procedures however further testing about the specification of the error correction representation revealed the existence of important short run deviations from unbiasedness even though these results hold strictly for a rather limited number of contracts and commodities they are encouraging for futures markets advocates in developing countries

watching the fuel gauge an international model of automobile fuel economy utilizing a new international data set and a non linear maximum likelihood model this study analyses the role of fuel prices income government taxation and technological change in influencing the consumers choice of fuel economy the results of this study imply that the consumers choice of automobile fuel efficiency is less sensitive to fuel prices and income than previously believed this inelasticity of the demand for fuel economy is important to consider when evaluating the potential impact of higher fuel economy mandates or higher fuel taxes this study also found that fuel price differentials and differences in the level of automobile purchase and registration taxes account for most of the difference in automobile fuel economy across countries

how reliable are hog futures as forecasts the chicago mercantile exchange hog futures contract was revamped in 1997 and it is one of the largest futures markets for a nonstorable commodity the literature is divided on whether or not futures prices for nonstorables provide reliable forecasts of cash prices we find that from 1998 to 2004 the hog futures market was an unbiased predictor of cash prices copyright 2008 oxford university press

symmetric or asymmetric oil prices a meta analysis approach the analysis of price asymmetries in the gasoline market is one of the most widely studied in energy economics however the great variation in the outcomes reported makes the drawing of any definitive conclusions difficult given this situation a meta analysis serves as an excellent tool to discover which characteristics of the various markets analyzed and which specific features of these studies might account for these differences in adopting such an approach this paper shows how the particular segment of the industry analyzed the characteristics of the data the years under review the type of publication and the introduction of control variables might explain this heterogeneity in results the paper concludes on these grounds that increased competition may significantly reduce the possibility of occurrence of asymmetric behavior these results should be taken into consideration therefore in future studies of asymmetries in the oil industry

retail gasoline price dynamics and local market power using monthly data from the 48 contiguous states except nevada for the 1988 2002 period it is shown that retail gasoline prices respond faster to wholesale price increases than to equivalent wholesale price decreases moreover markets with high average retail wholesale margins experience a slower adjustment and a more asymmetric response since gasoline is the only variable input average margins in a state likely reflect the degree of retail market power this suggests that sticky prices and response asymmetries in the gasoline market are at least partially a consequence of retail market power

asymmetric information and the structure of the banking industry abstract we analyze the effects of informational asymmetries on the market structure of the banking industry in a multi period model of spatial competition in the process of lending incumbent banks gather proprietary information about their clients acquiring an advantage over potential entrants we show that these informational asymmetries are important determinants of the industry structure and of banks strategic behavior contrary to traditional models of horizontal differentiation the steady state equilibrium is characterized by a finite number of banks even in the absence of exogenous fixed costs in addition less concentrated industry structures may be associated with higher interest rates

selling costs and switching costs explaining retail gasoline margins recent theoretical work has shown that price discrimination can take place in imperfectly competitive as well as monopoly markets the persistence of higher retail margins on unleaded than on leaded gasoline during the 1980s suggests that discrimination may occur even in very competitive markets this article studies a number of cost based explanations for such gasoline pricing as well as the possibility of price discrimination the analysis indicates that gas stations discriminate against groups of customers who are less likely to switch to another station the conclusions highlight the influence of shopping or search costs on pricing decisions even in markets thought to be quite competitive

dynamic pricing in retail gasoline markets supergame models of tacit collusion show that supportable price cost margins increase with expected future collusive profits ceteris paribus as a result collusive margins will be larger when demand is expected to increase or marginal costs are expected to decline using panel data on sales volume and gasoline prices in 43 cities over 72 months we find behavior consistent with tacit collusion in retail gasoline markets controlling for current demand and cost current margins increase with expected next month demand and decrease with expected next month cost the results are not consistent with intertemporal l inkages due to inventory behavior or customer loyalty

price regulation and relative price convergence evidence from the retail gasoline market in canada this paper explores price regulation and relative price convergence in the canadian retail gasoline market we use monthly data 2000 2010 on retail gasoline prices in 60 canadian cities to investigate i whether the retail gasoline market in canada has experienced a relative price convergence to the mean which is expected given the increased economic integration across canadian provinces and ii whether the introduction of price regulation mechanisms in new brunswick and nova scotia in july 2006 had any impact on the price convergence in these provinces we use a nonlinear panel unit root test and find solid evidence that canadian retail gasoline markets are well integrated across locales however the share of converging cities reveals a significant decline since july of 2006 the impact of price regulation on price convergence is mixed our results indicate that since the enactment of the regulation in all new brunswick cities 9 included in the dataset gasoline prices converge to the national mean volatility of price is also significantly reduced in contrast in the wake of price regulation in nova scotia all 6 cities of the province are non convergent to the mean with increased volatility and overall price level

comment on bank competition and access to finance international evidence there are two commonly acknowledged albeit conflicting predictions on the effect of banks market power on firms access to credit the structure performance hypothesis asserts that more market power leads to lower supply at higher prices in contrast the information based hypothesis asserts that more market power increases bank lending to informationally opaque borrowers in bank competition and access to finance international evidence beck demirguii kunt and maksimovic 2004 this issue of jmcb henceforth bdm investigate which hypothesis survives empirical scrutiny this is a research question that will never disappoint as the results will be important no matter which hypothesis prevails in the end it is not the first time the question has been addressed in the literature but bdm have made the most comprehensive study on this issue policymakers in developing countries no longer have to rely mostly on results from the u s banking market when they formulate policies for their emerging banking markets they can now learn a lesson from the experience of more than 6000 companies in 74 countries bdm s results suggest that in more concentrated banking markets high market power firms face higher financing obstacles bdm interpret this finding as evidence in support of the structure performance hypothesis and emphasize the negative effects of bank market power in my comments i would like to reinterpret these results emphasizing the positive effects of market power and express some concerns about the method of the paper

regulation and market power in the spanish liquefied petroleum gas industry progress or failure this paper presents a detailed study of the structure market power and competition in the distribution sector for liquefied petroleum gas lpg within spain it is a segment of energy consumption and supply that is not often given serious attention despite the fact that lpg is a crucial source of energy to many households in many countries in europe and in the rest of the world despite formally being an open and liberalized sector the spanish lpg market is characterized by high concentration within the industry repsol butano the dominant operator practically controls the entire value chain these structural characteristics probably justify state intervention in the form of price fixing in order to guarantee accessible prices for final consumers nevertheless applying this tool has had negative effects on the opening and liberalization process on the one hand it fails to encourage entry or an increase in the participation of new operators on the other it has considerably deteriorated the economic and financial performance of the distribution agents that are subjected to two strong forces first the dominant operator looks after its own interests and its income and second the government tries to defend the interests of final consumers by fixing prices that inadequately remunerate the activity this shows the contradictory regulatory actions that try to promote competition and then establish mechanisms to regulate activity by fixing prices that act as price limits these government set prices discourage new competitors from entering

dynamic pricing in the spanish gasoline market a tacit collusion equilibrium abstract during the last twenty years the spanish petrol market has undergone an intensive restructuration process it has changed from being a state owned monopoly to total liberalization and privatization this liberalization process was accompanied by measures that facilitated the creation of a national champion the repsol group which is a huge vertically integrated company with a high market share in all the industry s segments using a dynamic model this paper analyses whether the prices established by companies in the spanish gasoline market after the restructuration process fits with a tacit collusion equilibrium the empirical results show that a strategic behaviour of companies occurs and is compatible with a tacit collusion price strategy so the restructuration process does not seem to have introduced effective competition into the spanish gasoline market

the spanish retail petroleum market new patterns of competition since the liberalization of the industry in this paper we study the recent development of the spanish automotive fuels market in the context of a long process of liberalization and competition our aims are twofold first to overview the market s current patterns of competition while taking into account the political structural and strategic aspects that have marked the industry s recent evolution second to study in depth one competitive strategy that nowadays significantly influences competition and final prices the vertical relationships between operators and service stations our analysis draws attention to several indicators that may demonstrate the success of the opening and liberalization process increased levels of competition have stimulated the sector s growth development and modernization and given national firms an excellent platform for competing with newcomers furthermore studying the vertical agreements has produced interesting results we have found that relative price differences among brands increase in line with perceived quality differences and that the vertical separation of refineries and retailers eases price competition in the final market the empirical evidence was backed up with a database of 4164 spanish service stations

competition regulation and pricing behaviour in the spanish retail gasoline market abstract the restructuring of the spanish oil industry produced a highly concentrated oligopoly in the retail gasoline market in june 1990 the spanish government introduced a system of ceiling price regulation in order to ensure that liberalization was accompanied by adequate consumer protection by 1998 prices were left to the free market this paper examines the pricing behaviour of the retail gasoline market using multivariate error correction models over the period january 1993 abolishment of the state monopoly december 2004 the results suggest that gasoline retail prices respond symmetrically to increases as well as to decreases in the spot price of gasoline both over the period of price regulation january 1993 september 1998 and over the period of free market october 1998 december 2004 however once the ceiling price regulation was abolished cooperation emerged between the government and the major operators repsol ypf and cepsa elf to control the inflation rate this resulted in a slower rate of adjustment of gasoline retail prices when gasoline spot prices went up as compared with the european pattern finally the spanish retail margin was by the end of our timing period of analysis as in the starting years after the abolishment of the state monopoly above the european average this pattern confirms our political economic hypothesis which suggests that the spanish government and the oil companies were working together in reducing the inflation in periods of rising oil and gasoline prices it is also inferred that explaining the pricing pattern in energy markets may require different hypothesis than the classical perspective involving just firms taking advantage of market power

a theory of dynamic oligopoly ii price competition kinked demand curves and edgeworth cycles we provide game theoretic foundations for the classic kinked demand curve equilibrium and edgeworth cycle we analyze a model in which firms take turns choosing prices the model is intended to capture the idea of reactions based on short run commitment in a markov perfect equilibrium mpe a firm s move in any period depends only on the other firm s current price there are multiple mpe s consisting of both kinked demand curve equilibria and edgeworth cycles in any mpe profit is bounded away from the bertrand equilibrium level we show that a kinked demand curve at the monopoly price is the unique symmetric renegotiation proof equilibrium when there is little discounting we then endogenize the timing by allowing firms to move at any time subject to short run commitments we find that firms end up alternating thus vindicating the ad hoc timing assumption of our simpler model we also discuss how the model can be enriched to provide explanations for excess capacity and market sharing keiiwords tacit collusion markov perfect equilibrium kinked demand curve edgeworth cycle excess capacity market sharing endogenous timing

the price forecasting performance of futures markets for live cattle and hogs a disaggregated analysis four hypotheses about the price forecasting performance of live cattle and hog futures are tested using disaggregated data live cattle futures are found to have inadequate forecasting performance for each hypothesis and do not provide better forecasts than lagged cash prices live hog futures perform well for three hypotheses but not when economic conditions are unstable hog futures provide better forecasts than lagged cash prices the analysis does not support the contention that these futures markets are agencies for rational price formation

arbitrage cointegration and testing the unbiasedness hypothesis in financial markets we use a no arbitrage cost of carry asset pricing model to show that the existence of coin tegration between spot and forward futures prices depends on the time series properties of the cost of carry we argue that the conditions for cointegration are more likely to hold in currency markets than in commodity markets explaining many of the empirical results in the literature we also use this model to demonstrate why the forward rate forecast error the basis and the forward premium are serially correlated and to develop econometric tests ofthe unbiasedness hypothesis sometimes called the simple efficiency hypothesis in various financial markets the unbiasedness hypothesis is so prevalent in the finance liter ature that many tests for it have been developed we examine four of the common tests and and use our cointegration results to demonstrate why each of these tests should reject the null hypothesis of unbiasedness we find strong support for our hypothesis in the existing empirical literature

taxes cost and demand shifters as determinants in the regional gasoline price formation process evidence from spain abstract this paper examines the pass through of regional tax changes and spot price variations to regional gasoline prices in spain it also analyzes the impact of all major cost and demand shifters that contribute to regional gasoline price formation to address these research issues a reduced form price equation using monthly time series cross sectional tscs data from january 2004 through december 2008 is estimated strong and consistent evidence of full shifting of regional tax changes to regional gasoline prices is found gasoline spot price changes are more than proportionally passed through to retail prices in addition the empirical evidence shows on the one hand that regional gasoline price differences before taxes continue to be quite narrow and on the other hand that there is still a margin for larger gasoline price differences among regions this suggest that traditional practices from the monopoly era i e relatively uniform regional gasoline prices persist after the market has been liberalized which may have been facilitated by the strong and uniform presence of the major spanish based refining companies in the retail sector over the whole country

retail gasoline pricing what do we know abstract we use a data set consisting of a three year panel of prices from a sample of gasoline stations located in suburban washington dc and a corresponding census of the region s stations to develop three new empirical findings about retail gasoline pricing first while average retail margins vary substantially over time by more than 50 over the three years we analyze the shape of the margin distribution remains relatively constant second there is substantial heterogeneity in pricing behavior stations charging very low or very high prices are more likely to maintain their pricing position than stations charging prices near the mean third retail gasoline pricing is dynamic despite the heterogeneity in station pricing behavior stations frequently change their relative pricing position in this distribution sometimes dramatically we then relate these three findings to relevant theories of retail pricing while many models of retail pricing are consistent with some of our findings we find that all have serious shortcomings

higher prices at canadian gas pumps international crude oil prices or local market concentration an empirical investigation there is little consensus on whether higher retail gasoline prices in canada are the result of international crude oil price fluctuations or local market power exercised by large vertically integrated firms i find that although both increasing local market concentration and higher average monthly wholesale prices are positively and significantly associated with higher retail prices wholesale prices are more important than local market concentration similarly crude oil prices are more important than the number of local wholesalers in determining wholesale prices these results suggest that movements in gasoline prices are largely the result of input price fluctuations rather than local market structure

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

calculating the damage of a cartel subject to transition periods the international uranium cartel in the 1970s abstract the theory about cartel pricing and descriptive price statistics suggests that the price path over a cartel life cycle can be subject to gradual non linear transitions where the price path moves from to the non collusive to from the maximum collusive equilibrium ignoring such transitions can lead to biased estimates of the cartel and damage effects smooth transition regression str models are a class of models well suited to capture such transitions also under realistic conditions when the transition start and end dates are uncertain and when the two transitions are asymmetric we evaluate the international uranium cartel during the 1970s using both the mainstream approach based on a linear specification with a dummy variable to capture the cartel and an str model we are the first to use str models in the evaluation of a cartel damage effect using the str model we find that the damage effect is about 18 times higher as compared to the mainstream model

price dispersion and competition with differentiated sellers i measure price dispersion among differentiated retail gasoline sellers and study the relationship between dispersion and the local competitive environment significant price dispersion exists even after controlling for differences in station characteristics and price differences between sellers change frequently the extent of price dispersion is related to the density of local competition but this relationship varies significantly depending on the type of seller and the composition of its competitors these findings are consistent with interactions between seller and consumer heterogeneity that are not well understood in the existing price dispersion literature

rationality of survey data and tests for market efficiency in the foreign exchange markets abstract this paper tests the rational expectations hypothesis reh and the market efficiency hypothesis meh in the foreign exchange markets using survey data on expectations our results show that the spot exchange rates expected exchange rates and the forward rates all follow a random walk process hence the cointegration theory is employed to test the reh and meh all the test statistics support the reh but fail to support the meh we use survey data on expectations to identify the causes behind this failure of the meh jel f31 g14

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

the taxation effect on gasoline price asymmetry nexus evidence from both sides of the atlantic this paper explores the degree of competition in various gasoline markets and infers possible causes of price asymmetry across the globe for this purpose we use the dynamic ordinary least square method in order to estimate price asymmetry in twelve european countries and the united states for a sample of weekly observations which spans the period from june 1996 to august 2011 the results indicate the common perception that less competitive gasoline markets exhibit price asymmetry while highly competitive gasoline markets follow a symmetric price adjustment path finally the inclusion of taxes vat and excise tax into retail gasoline prices supports the existence of price asymmetry in many european countries

the pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices abstract crude and refined oil prices have been relatively high and volatile on a sustained basis since 1999 this paper considers the pass through of oil prices into consumer liquid i e petrol diesel and heating fuel prices in such an environment the pass through of oil prices into consumer liquid fuel prices has already been addressed extensively in the literature nonetheless much of this literature has either focused on the united states or on a time period when oil prices were relatively stable or has used monthly data the main contribution of this paper is a comprehensive combination of many features that have been considered before but rarely jointly these features include 1 the analysis of the euro area as an aggregate and a large number of countries the initial 12 member states 2 the consideration of different time periods 3 the modelling of the data in raw levels rather than in log levels this turns out to have important implications for our findings 4 the use of high frequency weekly data which as results will suggest are the lowest frequency one should consider 5 the investigation of the different stages of the production chain from crude oil prices to retail distribution refining costs and margins distribution and retailing costs and margins 6 the examination of prices including and excluding taxes excise and value added 7 the modelling of prices for three fuel types passenger car petrol and diesel separately and home heating fuel oil 8 lastly we also address the issue of possible asymmetries allowing for the pass through to vary according to a whether price are increasing or decreasing and b whether price levels are above or below their equilibrium level the main findings are as follows first as distribution and retailing costs and margins have been broadly stable on average the modelling of the relationship between consumer prices excluding taxes and upstream prices in raw levels rather than in logarithms has important implications for the stability of estimates of pass through when oil price levels rise significantly second considering spot prices for refined prices improves significantly the fit of the estimated models relative to using crude oil prices it also results in more economically meaningful results concerning the extent of pass through third oil price pass through occurs quickly with 90 occurring within three to five weeks fourth using a relatively broad specification allowing for asymmetry in the pass through from upstream to downstream prices there is little evidence of statistically significant asymmetries furthermore even where asymmetry is found to be statistically significant it is generally not economically significant lastly these results generally hold across most euro area countries with few exceptions

market power vertical integration and the wholesale price of gasoline this paper examines empirically the relationship between vertical integration and wholesale gasoline prices we use discrete and differential changes in the extent of vertical integration generated by mergers in west coast gasoline refining and retailing markets to test for incentives to raise rivals costs the research design allows us to test for a relationship between vertical integration and wholesale prices controlling for horizontal market structure cost shocks and trends we find evidence consistent with the strategic incentive to raise competitors input costs this suggests that vertical integration can have a significant impact on wholesale prices

the spanish oil sector from state intervention to free trade abstract this article describes how the entrance of spain into the ec forced the spanish oil sector to reorganize its relatively inefficient and backward structure in anticipation of future competition and in harmony with ec rules to protect the spanish industry over a transitional period spain replaced its former legal oil monopoly by a de facto monopoly recent developments show parallel with the development of a strong partly privatized state oil company the gradual disintegration of this system this is forcing the smaller private spanish oil companies to establish partnerships with foreign consortia to secure their positions in their home market

perfect competition urbanization and tax incidence in the retail gasoline market i introduction in applied tax incidence studies it is typically assumed that prices respond one for one to changes in sales and excise taxes chernick and reschovsky 1997 pechman 1985 shepard 1976 state of wisconsin department of revenue 2004 wiese rose and schluter 1995 zupnick 1975 is this assumption reasonable despite the fundamental role of tax incidence in the study of public finance there is surprisingly little empirical analysis that sheds light on who bears the burden of taxes in this article we examine the incidence of state gasoline excise taxes using monthly price data for all 50 states in the united states over the period 1984 1999 our estimation results generally indicate full shifting of gasoline taxes to the final consumer with changes in gasoline taxes fully reflected in the tax inclusive gasoline price almost instantly we also find that the incidence of excise taxes depends on the competitiveness of retail gasoline markets e g urban vs rural markets gasoline markets in urban states typically exhibit full shifting but those in rural states demonstrate somewhat less than full shifting although the issue of sales and excise tax incidence has received considerable attention over the years most research has focused on tax incidence theory and the standard conclusion of much of this theoretical analysis is that consumers bear the full burden of any sales and excise taxes 1 based primarily on this theoretical foundation most applied incidence studies assume that sales and excise taxes are fully reflected in consumer prices and the distribution of tax burdens across income classes necessarily reflects this assumption however actual empirical testing of this assumption of full forward shifting has been surprisingly sparse 2 in important recent research poterba 1996 and besley and rosen 1999 have conducted empirical analyses of the incidence of excise taxes poterba 1996 uses city specific clothing and personal care price data covering the 1947 1977 and the 1925 1939 periods to examine the degree to which state and local retail sales taxes are shifted to consumers with two data sets based on bureau of labor statistics bls city specific consumer price indices using these bls data on tax inclusive prices poterba 1996 constructs quarterly price indices for each of 28 standard metropolitan statistical areas smsas many of these 28 smsas experienced significant changes in sales tax rates and poterba 1996 uses these tax shocks to determine the incidence of sales taxes his estimation results are somewhat variable but in general he finds for the postwar period that taxes are fully shifted to consumers in some cases he finds limited evidence of overshifting although it is never possible to reject the null hypothesis that prices rise point for point with the changes in the tax and he also finds that full shifting typically though not always occurs in the first quarter of the tax change poterba 1996 also examines tax incidence for individual smsas during the depression era and his results indicate significant differences across metropolitan areas in the degree of tax shifting for example prices on women s clothing in chicago show significant overshifting but atlanta shows negative shifting a result that does not seem plausible besley and rosen 1999 also examine the incidence of sales taxes using price data for 12 narrowly defined commodities in 155 different u s cities using quarterly price data for the period 1982 1990 issued by the american chamber of commerce researchers association accra 3 they not only find full shifting for a number of commodities but also find overshifting for more than half the products a result they attribute to imperfect competition in the retail sector while this recent empirical research has significantly expanded our understanding of the actual nature of sales and excise tax incidence we believe that our work here on gasoline excise taxes makes several contributions to the empirical literature

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

the impact of cyclical demand movements on collusive behavior recent work by rotemberg and saloner 1986 investigates the effect of the business cycle on optimal collusive pricing by specifying that demand is subject to i i d shocks an implication of the i i d assumption is that firms expectations on future demand are unrelated to the current level of demand we put forth a model that allows for both the level of current demand and firms expectations on future demand to change over time thus it captures two important properties of the business cycle our analysis reveals that while the gain to deviating from a collusive agreement is greatest during booms firms find it most difficult to collude during recessions as the forgone profits from inducing a price war are relatively low an implication of this effect for pricing behavior is that at the same level of demand price is lower when demand is declining than when demand is rising consistent with previous theoretical work we find that firms price countercyclically for a range of values for the discount factor however numerical simulations reveal a greater tendency for firms to price countercyclically during recessions than during booms

sell or not sell biodiesel local competition and government measures the introduction of biofuels is one of the objectives of the european union for this reason measures to promote the production and consumption of this product have been implemented such as tax exemptions fixing a minimum amount of mixture or the introduction of public transport that consume biofuels in this paper we test different factors that can affect the introduction of biodiesel in the spanish gasoline market these factors are mainly the level of local competition technical difficulties and local government action empirical evidence shows that a higher level of competition more buses that consume biodiesel and a lower adjustment costs increase significantly the probability of sell biodiesel at service stations these results show how the promotion of competition and public procurement of vehicles can improve the commercialization of biofuels

bank concentration and financial constraints on firm level investment in europe abstract this study examines the effect of bank concentration on financing constraints of non financial firms in 14 european countries between 1992 and 2005 using firm level data we analyze financial constraints with the euler equation derived from the dynamic investment model we find that with a highly concentrated banking sector firms are less financially constrained this result is robust to consideration of firm opacity firm size and business cycle relaxation of financial constraint while greater for firms in less opaque industries also accrues for firms in more opaque industries greater bank concentration is associated with less tight financial constraint during both expansions and recessions results overall are consistent with an information based hypothesis that more market power increases banks incentives to produce information on potential borrowers findings are robust to consideration of country specific institutional factors

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