Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You and Your Team.

Learn More →

Transportation oil demand, consumer preferences and asymmetric prices

Transportation oil demand, consumer preferences and asymmetric prices Purpose – The aim of this paper is to establish the role of asymmetric price decompositions in UK road transportation fuel demand, make explicit the impact of the underlying energy demand trend, and disaggregate the estimation for gasoline and diesel demand as separate commodities. Design/methodology/approach – Dynamic UK transport oil demand functions are estimated using the Seemingly Unrelated Structural Time Series Model with decomposed prices to allow for asymmetric price responses. Findings – The importance of starting with a flexible modelling approach that incorporates both an underlying demand trend and asymmetric price response function is highlighted. Furthermore, these features can lead to different insights and policy implications than might arise from a model without them. As an example, a zero elasticity for a price‐cut is found (for both gasoline and diesel), implying that price reductions do not induce demand for road transportation fuel in the UK. Originality/value – The paper illustrates the importance of joint modelling of gasoline and diesel demand incorporating both asymmetric price responses and stochastic underlying energy demand trends. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Transportation oil demand, consumer preferences and asymmetric prices

Loading next page...
 
/lp/emerald-publishing/transportation-oil-demand-consumer-preferences-and-asymmetric-prices-pMGmEl9e6J
Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0144-3585
DOI
10.1108/01443581111161797
Publisher site
See Article on Publisher Site

Abstract

Purpose – The aim of this paper is to establish the role of asymmetric price decompositions in UK road transportation fuel demand, make explicit the impact of the underlying energy demand trend, and disaggregate the estimation for gasoline and diesel demand as separate commodities. Design/methodology/approach – Dynamic UK transport oil demand functions are estimated using the Seemingly Unrelated Structural Time Series Model with decomposed prices to allow for asymmetric price responses. Findings – The importance of starting with a flexible modelling approach that incorporates both an underlying demand trend and asymmetric price response function is highlighted. Furthermore, these features can lead to different insights and policy implications than might arise from a model without them. As an example, a zero elasticity for a price‐cut is found (for both gasoline and diesel), implying that price reductions do not induce demand for road transportation fuel in the UK. Originality/value – The paper illustrates the importance of joint modelling of gasoline and diesel demand incorporating both asymmetric price responses and stochastic underlying energy demand trends.

Journal

Journal of Economic StudiesEmerald Publishing

Published: Sep 27, 2011

Keywords: Gasoline; Diesel; Asymmetry; Pricing; Underlying energy demand trend; Consumer behaviour; United Kingdom

References