Edgeworth Price Cycles in Gasoline: Evidence from the United States

Edgeworth Price Cycles in Gasoline: Evidence from the United States Studies of gasoline prices in multiple countries have found sequences of a sharp price increase followed by gradual decreases. This pattern is linked to Maskin and Tirole (Econometrica 56:571–599, 1988) duopoly pricing game and labeled Edgeworth price cycles. We examine data on average daily MSA-level retail gasoline prices for 350 MSAs in the US from 1996–2010. We confirm the finding of others and show that a relatively small number of US MSAs in contiguous upper Midwestern states evidence price cycling. However, our lengthy data set allows us to see that these MSAs began cycling in 2000. Thus, we can examine prices in cycling and non-cycling MSAs before and after cycling and find that prices are lower in MSAs that began cycling. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Edgeworth Price Cycles in Gasoline: Evidence from the United States

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Publisher
Springer Journals
Copyright
Copyright © 2012 by Springer Science+Business Media New York (outside the USA)
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-012-9372-6
Publisher site
See Article on Publisher Site

Abstract

Studies of gasoline prices in multiple countries have found sequences of a sharp price increase followed by gradual decreases. This pattern is linked to Maskin and Tirole (Econometrica 56:571–599, 1988) duopoly pricing game and labeled Edgeworth price cycles. We examine data on average daily MSA-level retail gasoline prices for 350 MSAs in the US from 1996–2010. We confirm the finding of others and show that a relatively small number of US MSAs in contiguous upper Midwestern states evidence price cycling. However, our lengthy data set allows us to see that these MSAs began cycling in 2000. Thus, we can examine prices in cycling and non-cycling MSAs before and after cycling and find that prices are lower in MSAs that began cycling.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Dec 27, 2012

References

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