Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, January 26, 2009

On the Effects of Suggested Prices in Gasoline Markets

Posted by D. Daniel Sokol

Riemer P. Faber (Erasmus School of Economics, Erasmus University Rotterdam) and Maarten C.W. Janssen (University of Vienna, and Erasmus School of Economics, Erasmus University Rotterdam) have some thoughts On the Effects of Suggested Prices in Gasoline Markets.

ABSTRACT: This article analyzes the role of suggested prices in the Dutch retail market for gasoline. Suggested prices are announced by large oil companies with the suggestion that retailers follow them. There are at least two competing rationales for the existence of suggested prices: they may either help retailers translate changes in international gasoline spot market prices into retail prices, or they may coordinate retail prices. We show that there is, next to the international spot market prices, additional information in suggested prices that explains retail prices. Therefore, we conclude that suggested prices help to coordinate retail prices.

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