Forecasting Gasoline Prices in the Presence of Edgeworth Price Cycles

36 Pages Posted: 27 Aug 2015

See all articles by Michael D. Noel

Michael D. Noel

Texas Tech University

Lanlan Chu

Texas Tech University

Date Written: May 27, 2015

Abstract

Forecasting is a central theme in economics. The ability to forecast prices enables economic agents to make optimal decisions for the present and future. In this article, we investigate if and how gasoline prices can be forecast in retail gasoline markets that are subject to high-frequency, asymmetric price cycles known as Edgeworth price cycles. We examine a series of purchase timing decision rules and a series of feasible forecasting algorithms for updating those rules over time. We find that, in the presence of cycles, agents in our five Australian markets can systematically reduce purchase prices below market average the equivalent of 11 to 15 U.S. cents per gallon, using simple decision rules and feasible forecasting algorithms.

Suggested Citation

Noel, Michael D. and Chu, Lanlan, Forecasting Gasoline Prices in the Presence of Edgeworth Price Cycles (May 27, 2015). Available at SSRN: https://ssrn.com/abstract=2650821 or http://dx.doi.org/10.2139/ssrn.2650821

Michael D. Noel (Contact Author)

Texas Tech University ( email )

237 Holden Hall
Box 41014
Lubbock, TX 79407
United States

Lanlan Chu

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

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