Tuesday, July 23, 2013
Posted by D. Daniel Sokol
O. Foros, Norwegian School of Economics (NHH) - Department of Economics and Frode Steen, Norwegian School of Economics (NHH) - Department of Economics address Vertical Control and Price Cycles in Gasoline Retailing.
ABSTRACT: We examine Norwegian gasoline pump prices using daily station‐specific observations from 2003 to 2006. The four big gasoline companies use a vertical restraint that is adopted industry‐wide (labeled price support). This moves price control from the hands of independent retailers into the hands of the headquarters. Retail gasoline prices follow a fixed weekly pattern, where we observe de facto simultaneous decision‐making by the headquarters (without knowledge of their rivals’ prices) when every Monday around noon they decide to increase pump prices to the same level. The price level on Mondays corresponds to the recommended prices published by the headquarters of the gasoline companies.