1997
DOI: 10.1162/003355397555118
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Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?

Abstract: Our empirical investigation confirms the common belief that retail gasoline prices react more quickly to increases in crude oil prices than to decreases. Nearly all of the response to a crude oil price increase shows up in the pump price within 4 weeks, while decreases are passed along gradually over 8 weeks. The asymmetry could indicate market power of some producers or distributors, or it could result from inventory adjustment costs. By analyzing price transmission at different points in the distribution cha… Show more

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Cited by 801 publications
(592 citation statements)
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“…9 This is in contrast to the United States where some independent retailers do possess significant market share. For further details please refer toBorenstein et al (1997).…”
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confidence: 99%
“…9 This is in contrast to the United States where some independent retailers do possess significant market share. For further details please refer toBorenstein et al (1997).…”
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confidence: 99%
“…These models with consumer search costs were previously suggested by some empirical studies (Borenstein et al, 1997). For an empirical analysis of these models, see Richards, Gómez and Lee (2014).…”
Section: Notesmentioning
confidence: 93%
“…According to the "Rockets and Feathers Hypothesis" (RFH) firstly termed by Bacon [6], the transmission mechanism of positive and negative changes in the price of oil to the price of gasoline/diesel is asymmetric. Many studies find that the responses of petroleum products price to increases in crude oil price are quicker than a crude oil price decrease [7][8][9][10][11][12][13][14] and the asymmetric effects are more evident when the oil price shocks are larger [15]. Borenstein and Shepard [16] confirm that asymmetric price adjustments in the gasoline market could be attributed to the suppliers' production adjustment costs.…”
Section: Literature Reviewmentioning
confidence: 99%