Do Rockets Rise Faster and Feathers Fall Slower in an Atmosphere of Local Market Power? Evidence from the Retail Gasoline Market

40 Pages Posted: 28 Feb 2007

Date Written: July 2007

Abstract

This study explores the possibility that local market power influences the observed asymmetric relationship between changes in wholesale gasoline costs and changes in retail gasoline prices. I exploit an original data set of weekly gas station prices in Southern California from September 2002 to May 2003, and take advantage of detailed station and local market level characteristics to determine the extent to which geographic and product differentiation influences price response asymmetry. I find that brand identity, proximity to rival stations, and local market features and demographics each influence a station's predicted price-response asymmetry.

Web Appendix available at: http://ssrn.com/abstract=1000964

Keywords: Gasoline, Pricing, Market Power, Market Structure, Product Differentiation, Spatial Differentiation, Bayesian, Error Correction Model

Suggested Citation

Verlinda, Jeremy Alan, Do Rockets Rise Faster and Feathers Fall Slower in an Atmosphere of Local Market Power? Evidence from the Retail Gasoline Market (July 2007). Available at SSRN: https://ssrn.com/abstract=965779 or http://dx.doi.org/10.2139/ssrn.965779

Jeremy Alan Verlinda (Contact Author)

The Brattle Group ( email )

1800 M St NW, Suite 700 North
Washington, DC 20036
United States
2024193370 (Phone)

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