ASYMMETRIC DYNAMIC PRICING IN A LOCAL GASOLINE RETAIL MARKET^*

Abstract

Asymmetric-price adjustment is a common phenomenon in many markets around the world, particularly in retail gasoline markets. This paper studies the existence of this phenomenon in the retail gasoline market in the city of Santiago, Chile, using a data set of weekly gas station prices that covers a period of almost four years. We found that prices adjust asymmetrically, and the asymmetry is different for branded gas stations and unbranded stations. In addition, we found that the asymmetry for high-margin stations is statistically equivalent to that for low-margin stations. This evidence is suggestive of collusion as a rationale for the asymmetric pricing policy observed.

Nonlinear and asymmetric pricing behaviour in the Spanish gasoline market

“…Mercuri argues how detrimental is this asymmetric behaviour for consumers and connects the asymmetry with potential noncompetitive clauses. On the other hand, Balmaceda (2008) studies the asymmetry price transmission for the case of Chile, where there is a unique refined public firm (ENAP), which belongs to the state. Instead of using time-series, a panel of weakly data with several service stations over time is applied.…”

Asymmetric Price Responses of Gasoline Stations: Evidence for Heterogeneity of Retailers

“…Deltas (2008) concludes that US states with higher average margins have a higher degree of asymmetry. However, Balmaceda and Soruco (2008) find that a group of branded stations and a group of stations with a high margin have the same degree of asymmetry as respectively a group of unbranded stations and a group of stations with a low margin. 5 One exception is Balmaceda and Soruco (2008), who use weekly retail and spot market price data from Chile.…”

“…However, Balmaceda and Soruco (2008) find that a group of branded stations and a group of stations with a high margin have the same degree of asymmetry as respectively a group of unbranded stations and a group of stations with a low margin. 5 One exception is Balmaceda and Soruco (2008), who use weekly retail and spot market price data from Chile. Because of institutional factors gasoline stations and the state-owned oil company adjust prices only once a week.…”

“…For example, Borenstein, Cameron, and Gilbert (1997) study the US gasoline market and find that semimonthly aggregated retail prices respond asymmetrically to wholesale price changes. Studies that use weekly data of individual gasoline stations are Lewis (2005) (420 stations), Verlinda (2008) (approximately 90 stations), Balmaceda and Soruco (2008) Deltas (2008) investigates asymmetry via monthly US state retail prices, Lewis and Noel (2009) use daily city retail prices, and Radchenko (2005) uses weekly national retail prices. These studies also find evidence of asymmetric price responses.…”

Competition in a Spatial Retail Petroleum Market

“…Economics (see Hubbard, 2008, Verlinda, 2008, Deltas, 2008, Balmaceda & Soruco, 2008and Lewis, 2008a and is known as the "rockets and feathers" debate. The first to notice this pattern was the UK Monopolies and Mergers Commission (1990), but the first to put it to an analytical test, and to coin the phrase, was Bacon (1991).…”