Vertical control and price cycles in gasoline retailing

Abstract

We examine Norwegian gasoline pump prices using daily station-specific observations from 2003 to 2006. The big four gasoline companies use an industry-wide adopted vertical restraint (labeled price support) to move price control from the hands of independent retailers into the hands of the headquarters of the big four companies. Retail gasoline prices follow a fixed weekly pattern, where retail outlets all over Norway simultaneously (without knowing their rivals’ prices) increase their prices to the same level every Monday around noon. The price level on Mondays corresponds to the recommended prices published by the gasoline companies’ headquarters.