Retail Gasoline Price Dynamics and Local Market Power
- Topics:
- Grocery
- Source:
- University of Illinois
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Overview: Using monthly data from the 48 contiguous states (except Nevada) for the 1988-2002 period, the paper shows that retail gasoline prices respond faster to wholesale price increases than to equivalent wholesale price decreases. Since gasoline is the only variable input, one could reasonably assume that average margins in a state reflect the degree of market power at the retail level. This suggests that sticky prices and response asymmetries in the gasoline market are, at least partially, a consequence of retail market power, raising the possibility that slow price adjustments and asymmetric price responses could be used as an indicator of potential departure from perfect competition.
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Format: PDF | Size: 236KB | Date: Aug 2004 | Pages: 27
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