Gasoline Prices Jump up on Mondays: An Outcome of Aggressive Competition?

CCP Working Paper No. 08-20

38 Pages Posted: 19 Jun 2008

See all articles by Øystein Foros

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 2008

Abstract

This paper examines Norwegian gasoline pump prices using daily station-specific observations from March 2003 to March 2006. Whereas studies that have analysed similar price cycles in other countries find support for the Edgeworth cycle theory (Maskin and Tirole, 1988), we demonstrate that Norwegian gasoline price cycles involve a form of coordinated behavior. We also show that gasoline prices follow a fixed weekly pattern, with prices increasing significantly every Monday at noon, and that gasoline companies appear to use the recommended retail price as a coordination device with a fixed link between the retail and recommended prices. Moreover, the weekly pattern changed in April 2004; whereas Thursday had been the high-price day, Monday now became the high-price day. The price-cost margin also increased significantly after the weekly pattern changed in April 2004.

Suggested Citation

Foros, Øystein and Steen, Frode, Gasoline Prices Jump up on Mondays: An Outcome of Aggressive Competition? (March 2008). CCP Working Paper No. 08-20. Available at SSRN: https://ssrn.com/abstract=1114762 or http://dx.doi.org/10.2139/ssrn.1114762

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Frode Steen (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 55 959 259 (Phone)
+47 55 959 543 (Fax)

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