Working Paper: CEPR ID: DP6783
Authors: Ystein Foros; Frode Steen
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.
Keywords: gasoline; intertemporal price discrimination; price coordination
JEL Codes: D40; L11; L42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| day of the week (G14) | gasoline price increase (Q31) |
| coordinated behavior among firms (L14) | gasoline price increase (Q31) |
| recommended prices set by headquarters (L11) | coordinated behavior among firms (L14) |
| shift from Thursday to Monday (P39) | gasoline price increase (Q31) |
| gasoline price increase (Q31) | gross margin of gasoline stations increase (L95) |