Experimental Research of the Rockets and Feathers Phenomenon in Gas Markets PDF Download
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Author: Roman Glikman
Publisher:
ISBN:
Category : Gasoline
Languages : en
Pages : 78
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Book Description
Author: Roman Glikman
Publisher:
ISBN:
Category : Gasoline
Languages : en
Pages : 78
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Book Description
Author: Emmanuel Asane-Otoo
Publisher:
ISBN:
Category :
Languages : en
Pages :
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In this paper, we revisit the empirical observation that prices rise like rockets when input costs increase but fall like feathers when input costs decrease. The analysis draws on a novel dataset that include daily retail prices of gasoline and diesel from virtually all fuel stations in Germany over the period from January 1, 2014 to December 31, 2018. Our findings from the national, state-specific and station-level analyses based on an asymmetric error correction model indicate that asymmetric pricing is the norm rather than exception. Specifically, we find empirical evidence that points to a pervasive rockets-and-feathers pattern. We also find that asymmetric pricing in the German retail fuel market might partly be the consequence of tacit collusion among competitors as well as disparate search intensity on the part of consumers. We further show that temporal aggregation of station-level price data might lead to inaccurate inferences and could account for the contradictory findings in the extant literature.
Author: Ralph C. Bayer
Publisher:
ISBN:
Category : Prices
Languages : en
Pages :
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Consumers often complain that retail prices respond faster to increases in wholesale prices than to decreases. Despite many empirical studies confirming this Rockets-and-Feathers phenomenon for different industries, the mechanism driving it is not well understood. In this paper, we show that, in contrast to the theoretical prediction, asymmetric price adjustment to cost shocks, as well as price dispersion, arises in experimental Diamond (1971) markets. The analysis of individual behavior suggests that the observed price dispersion can be explained by bounded rationality, as our data are well explained by Quantal Response Equilibrium (McKelvey and Palfrey 1995). Asymmetric price adjustment is caused by the updating speed of buyers with adaptive expectations being different after positive and negative cost shocks.
Author: Mariano E. Tappata
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
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Prices rise like rockets but fall like feathers. This stylized fact of most markets is confirmed by many empirical studies. In this paper, I develop a model with competitive firms and rational partially informed consumers where the asymmetric response to costs by firms emerges naturally. In contrast to public opinion and past work, collusion is not necessary to explain such a result.
Author: Robert William Bacon
Publisher:
ISBN: 9780948061332
Category : Petroleum industry and trade
Languages : en
Pages : 25
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Author: Matteo Manera
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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This paper re-examines the issue of asymmetries in the transmission of shocks to crude oil prices onto the retail price of gasoline. Relative to the previous literature, the distinguishing features of the present paper are: i) use of updated and comparable data to carry out an international comparison of gasoline markets; ii) two-stage modeling of the transmission of oil price shocks to gasoline prices (first refinery stage and second distribution stage), in order to assess possible asymmetries at either one or both stages; iii) use of asymmetric error correction models to distinguish between asymmetries that arise from short-run deviations in input prices and from the speed at which the gasoline price reverts to its long-run level; iv) explicit, possibly asymmetric, role of the exchange rate, as crude oil is paid for in dollars whereas gasoline sells for different sums of national currencies; v) bootstrapping of F tests of asymmetries, in order to overcome the low-power problem of conventional testing procedures. In contrast to several previous findings, the results generally point to widespread differences in both adjustment speeds and short-run responses when input prices rise or fall.
Author: Sven Heim
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Jeremy A. Verlinda
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ISBN:
Category :
Languages : en
Pages : 0
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This study explores the possibility that local market power influences the observed asymmetric relationship between changes in wholesale gasoline costs and changes in retail gasoline prices. I exploit an original data set of weekly gas station prices in Southern California from September 2002 to May 2003, and take advantage of detailed station and local market level characteristics to determine the extent to which geographic and product differentiation influences price response asymmetry. I find that brand identity, proximity to rival stations, and local market features and demographics each influence a station's predicted price-response asymmetry. Web Appendix available at: http://ssrn.com/abstract=1000964.
Author: Robert Bacon
Publisher:
ISBN:
Category : Electronic book
Languages : en
Pages :
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Author: José Ma Martín-Moreno
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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In this paper we analyse the potential asymmetric response of retail prices for gasoline and diesel-fuel to changes in oil prices for the Spanish economy and its relation with the so-called 'rockets and feathers' behaviour. We show that the assumption made by previous studies, which use as the key explanatory variable the sign -positive or negative- of the change in international oil prices, is inadequate for the Spanish case and the magnitude of the change in international oil prices is also relevant. For small changes in international oil prices there is neither price asymmetry nor rockets and feathers behavior in the retail markets. However, price asymmetries in line with rockets and feathers behavior in retail gasoline and gasoil markets are present when these changes exceed a certain threshold. Following Martín-Moreno et al. (2018) we first apply an Auto-regressive Error Correction Model and endogenously estimate the threshold triggering the rockets and feathers behaviour. A time-varying nature for the dynamic response of retail prices to oil price shocks is revealed when we estimate the TAR-ECM model using rolling windows. Hence, in a second stage, we use a Markov-switching estimation of the model to test the robustness of the results given its suitability to changing environments. This study could have relevant policy implications for the Spanish gasoline and gasoil retail markets due to the ongoing debate on the existence of a rockets and feathers behavior in gasoline and gasoil retail markets between the Spanish regulatory body and the oil companies.
