Antitrust & Competition Policy Blog

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

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Monday, September 12, 2011

Price Cycles and Price Leadership in Gasoline Markets: New Evidence from Canada

Posted by D. Daniel Sokol

David P. Byrne, University of Melbourne and Roger Ware, Queen's University discuss Price Cycles and Price Leadership in Gasoline Markets: New Evidence from Canada.

ABSTRACT: This paper studies the determinants of Edgeworth Cycles, price leadership and coordination in retail gasoline markets using daily station-level price data for 110 markets in Ontario, Canada for 2007-2008. We find an "inverse-U" relationship between markets' propensity to exhibit price cycles and their size. More concentrated markets are less likely to exhibits cycles and we highlight regional clustering among cycling and non-cycling markets. Within cycling markets, we find brands' stations (Esso, Shell, Petro-Canada, Sunoco) lead price jumps and coordinate market prices, while independents (Ultramar, Pioneer, Olco, MacEwen) aggressively undercut prices over the cycle.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/09/price-cycles-and-price-leadership-in-gasoline-markets-new-evidence-from-canada.html

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