How Do Consumers Respond to Gasoline Price Cycles?

25 Pages Posted: 2 Aug 2011 Last revised: 4 Dec 2013

See all articles by David P. Byrne

David P. Byrne

The University of Melbourne

Gordon Leslie

Monash University - Department of Economics

Roger Ware

Queen's University

Date Written: November 28, 2013

Abstract

This paper empirically studies how consumers respond to retail gasoline price cycles. Our analysis uses new station-level price data from local markets in Ontario, Canada, and a unique market-level measure of consumer responsiveness based on web traffic from gasoline price reporting websites. We first document how stations use coordinated pricing strategies that give rise to large daily changes in price levels and dispersion in cycling gasoline markets. We then show consumer responsiveness exhibits cycles that move with these price fluctuations. Through a series of tests we find that forward-looking stockpiling behavior by consumers plays a central role in generating these patterns.

Keywords: Retail gasoline price cycles, Dynamic demand, Consumer search

JEL Classification: L11, L9, D22

Suggested Citation

Byrne, David P. and Leslie, Gordon and Ware, Roger, How Do Consumers Respond to Gasoline Price Cycles? (November 28, 2013). Available at SSRN: https://ssrn.com/abstract=1903558 or http://dx.doi.org/10.2139/ssrn.1903558

David P. Byrne (Contact Author)

The University of Melbourne ( email )

Level 4
111 Barry Street
Melbourne, Victoria 3010
Australia

HOME PAGE: http://sites.google.com/view/dprbyrne/

Gordon Leslie

Monash University - Department of Economics ( email )

Faculty of Business and Economics
900 Dandenong Rd
Caulfield East, Victoria 3145
Australia

Roger Ware

Queen's University ( email )

Kingston, Ontario K7L 3N6
Canada

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