Price Effects of Calling Out Market Power: A Study of the COVID-19 Oil Price Shock

28 Pages Posted: 5 Aug 2020 Last revised: 29 Apr 2022

See all articles by Aaron Barkley

Aaron Barkley

University of Melbourne

David P. Byrne

University of Melbourne

Xiaosong (Andy) Wu

University of Melbourne

Date Written: April 27, 2022

Abstract

Governments often make public announcements that call into question firms' misuse of market power. Yet little is known about how firms respond to them. We study gasoline retailers' price responses to antitrust announcements shaming them for price gouging during the COVID-19 pandemic. We identify price effects using a high-frequency event-study leveraging unique real-time station level price data and well-identified, discrete antitrust announcements. We find evidence of announcement effects that depend on firms' pre-announcement margins and hence exposure to being publicly shamed. Public statements by antitrust questioning firms' misuse of market power can indeed contain signals that affect equilibrium outcomes.

Keywords: Antitrust Announcements, Cost Pass-through, High-Frequency Event Study, Retail Gasoline

JEL Classification: L11, L13, L40, L71

Suggested Citation

Barkley, Aaron and Byrne, David P. and Wu, Xiaosong, Price Effects of Calling Out Market Power: A Study of the COVID-19 Oil Price Shock (April 27, 2022). Available at SSRN: https://ssrn.com/abstract=3665467 or http://dx.doi.org/10.2139/ssrn.3665467

Aaron Barkley

University of Melbourne ( email )

Melbourne, 3010
Australia

David P. Byrne (Contact Author)

University of Melbourne ( email )

Level 4
111 Barry Street
Melbourne, Victoria 3010
Australia

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

Xiaosong Wu

University of Melbourne

Level 4
111 Barry Street
Melbourne, 3010
Australia

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