Vertical Control and Price Cycles in Gasoline Retailing

22 Pages Posted: 20 Jun 2013  

Øystein Foros

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

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics

Date Written: July 2013

Abstract

We examine Norwegian gasoline pump prices using daily station‐specific observations from 2003 to 2006. The four big gasoline companies use a vertical restraint that is adopted industry‐wide (labeled price support). This moves price control from the hands of independent retailers into the hands of the headquarters. Retail gasoline prices follow a fixed weekly pattern, where we observe de facto simultaneous decision‐making by the headquarters (without knowledge of their rivals’ prices) when every Monday around noon they decide to increase pump prices to the same level. The price level on Mondays corresponds to the recommended prices published by the headquarters of the gasoline companies.

Keywords: Pricing, retail gasoline competition, vertical restraints

JEL Classification: C20, D40, L11, L42, L91

Suggested Citation

Foros, Øystein and Steen, Frode, Vertical Control and Price Cycles in Gasoline Retailing (July 2013). The Scandinavian Journal of Economics, Vol. 115, Issue 3, pp. 640-661, 2013. Available at SSRN: https://ssrn.com/abstract=2282344 or http://dx.doi.org/10.1111/sjoe.12024

Øystein Foros (Contact Author)

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

Helleveien 30
Bergen, NO-5045
Norway

Frode Steen

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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