Gasoline prices jump up on Mondays : an outcome of aggressive competition?
Working paper
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Date
2008-03Metadata
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- Discussion papers (SAM) [662]
Abstract
This paper examines Norwegian gasoline pump prices using daily station-specific
observations from March 2003 to March 2006. Whereas studies that have analyzed
similar price cycles in other countries find support for the Edgeworth cycle theory
(Maskin and Tirole, 1988), we demonstrate that Norwegian gasoline price cycles
involve a form of coordinated behavior. We also show that gasoline prices follow a
fixed weekly pattern, with prices increasing significantly every Monday at noon, and
that gasoline companies appear to use the recommended price as a coordination
device with a fixed link between the retail and recommended prices. Moreover, the
weekly pattern changed in April 2004; whereas Thursday had been the high-price day,
Monday now became the high-price day. The price–cost margin also increased
significantly after the weekly pattern changed in April 2004.
Publisher
Norwegian School of Economics and Business Administration. Department of EconomicsSeries
Discussion paper2008:4