Gasoline Price Cycles Under Discrete Time Pricing

Nicolas De Roos, Hajime Katayama

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

We characterise petrol pricing dynamics in an unusual policy environment. A timing restriction in the Western Australian market imposes discrete time pricing on petrol retailers, enabling us to observe the exact timing of price changes. We employ a Markov-switching regression model, finding the existence of Edgeworth price cycles of a similar nature to those recently observed in some other retail petrol markets. Cycles are frequent, asymmetric and of substantial amplitude. Importantly, firms change prices almost every period, limiting the relevance of the leading theory of Edgeworth cycles due to Maskin and Tirole (). We also discuss episodes of disruption and evolution of the price cycle.

Original languageEnglish
Pages (from-to)175-193
Number of pages19
JournalEconomic Record
Volume89
Issue number285
DOIs
Publication statusPublished - 2013 Jun

Fingerprint

Gasoline prices
Pricing
Discrete-time
Price changes
Retailers
Switching regression models
Retail market
Markov switching
Dynamic pricing
Disruption

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Gasoline Price Cycles Under Discrete Time Pricing. / De Roos, Nicolas; Katayama, Hajime.

In: Economic Record, Vol. 89, No. 285, 06.2013, p. 175-193.

Research output: Contribution to journalArticle

De Roos, Nicolas ; Katayama, Hajime. / Gasoline Price Cycles Under Discrete Time Pricing. In: Economic Record. 2013 ; Vol. 89, No. 285. pp. 175-193.
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