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| Author: | Borenstein, S. Shepard, A. |
| Title: | Dynamic pricing in retail gasoline markets |
| Journal: | RAND Journal of Economics
1996 : AUTUMN, VOL. 27:3, p. 429-451 |
| Index terms: | ECONOMICS PRICING GAS INDUSTRY |
| Language: | eng |
| Abstract: | Supergame models of tacit collusion show that supportable price-cost margins increase with expected future collusive profits, ceteris parabus. As a result, collusive margins will be larger when demand is expected to increase or marginal costs are expected to decline. Using panel data on sales volume and gasoline prices in 43 cities over 72 months, the authors find behaviour consistent with tacit collusion in retail gasoline markets. Controlling for current demand and cost, current margins increase with expected next-month demand and decrease with expected next-month cost. |
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