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Price dispersion is a prevalent feature even in markets where, arguably, homogeneous goods are traded. At the heart of the causes of price dispersion lie the firms' strategic interactions with their customers and rivals. Consumers' eagerness to search for lower prices tends to reduce dispersion because it enhances competition. On the other hand, the firm's inability to sustain tacit collusion increases price dispersion. Wholesale cost shock can impact both. We use data on retail gasoline markets from Colombia to assess whether changes in price dispersion following wholesale cost shocks are explained by consumers searching or by firms breaking away from collusive equilibria. We also use a forced divestiture case to explore the role of market structure on the extent of price dispersion. Our findings suggest that changes in price dispersion following wholesale cost shocks are driven by consumers searching more intensely for lower prices. We also find a positive relationship between the number of brands in a market and how dispersed prices are. [ABSTRACT FROM AUTHOR]

First, we analyze how regular days off from competition and a time-dependent price pattern affect firm performance. Second, we examine the effects on firms' profitability from consumers' changing search- and timing behavior. We use microdata from gasoline retailing in Norway. From 2004 to 2017, firms practiced an industry-wide day off from competition, starting on Mondays at noon, by increasing prices to a common level given by the recommended prices (decided and published in advance). In turn, a foreseeable low-price window is open before every restoration. During the data period, we observe an additional weekly restoration on Thursdays at noon. The additional day off from competition increases firm performance. As expected, a conventional price search of where to buy reduces firms' profitability. In contrast, consumers who are aware of the cycle and spend effort on when to buy have a positive impact on firms' profitability. If consumers spend effort on when to buy, they attempt to tank during low price windows. By its very nature, this shrink consumers' ability to compare prices at several outlets. Consequently, more attention to when to buy may soften price competition. [ABSTRACT FROM AUTHOR]

There is a widespread suspicion that suggested prices act as a focal point for individual firms when setting their prices. Oil companies announce suggested prices for gasoline stations in the Dutch retail market. We show that, compared to the gasoline spot market price, suggested prices contain additional information that explains retail price changes. We conclude that suggested prices have a horizontal coordinating effect in the sense that retail prices react to information that suggested prices contain and that is unrelated to firms' costs (i.e., the information that firms use under normal competitive conditions). [ABSTRACT FROM AUTHOR]

Abstract: This paper analyses how oil industry‐related activities in neighbouring gasoline markets affect local markets. Our contribution consists of applying spatial econometric models to better understand pricing behaviour in US gasoline markets and the spatial phenomena unique to this particular industry. We find that neighbouring state‐level gasoline price variation explains a large portion of the variation of in‐state (or local) gasoline prices. Consistent with intuition, the empirical results imply that wholesale gasoline prices are positively affected by state and federal‐level gasoline content regulations. Further, our results suggest that changes in state‐level wholesale gasoline prices respond to both in‐state and neighbouring‐state inventory levels. [ABSTRACT FROM AUTHOR]

Policy makers and regulators are increasingly interested in the use of information disclosure as a regulatory instrument to improve firms’ behavior. However, little has been done using micro-level data to investigate whether information provision may trigger peer influence among firms that affects their compliance behavior. Using station-level inspection verification data from the Mexican gasoline market, this paper examines whether gas stations react to peers’ performance to adjust their own compliance decisions. The information disclosure policy assigned each inspected gas station with green, yellow, or red colors to indicate the status of compliance, minor violation, and severe violation, respectively. We find strong evidence of peer influence triggered by information spillover. The probability of being in compliance increases as the number of “green” peers increases. We use both municipalities and postal codes as geographic boundaries to define potential peers, and find similar results. Our findings also suggest that the magnitude of peer effects varies across municipalities: the effects appear to be greater in wealthier, more educated communities. [ABSTRACT FROM AUTHOR]

There exist two possible aggregation issues in studies to asymmetric price responses: (i) an issue due to aggregation over time, and (ii) an issue due to aggregation over space. Empirical studies already confirm the existence of the first issue. This paper confirms the existence of the second issue by studying daily retail prices of individual gasoline stations. I find that 38% of the stations respond asymmetrically to changes in the gasoline spot market price. Hence, asymmetric pricing is a feature of individual firms. [ABSTRACT FROM AUTHOR]

We analyze collusion in two comparable market structures. In the first market structure, only one firm is vertically integrated; there is one independent firm in the upstream industry and another independent firm in the downstream industry. In the second market structure, there are only two vertically integrated firms that can trade among themselves in the intermediate good market. The second market structure mimics markets like the California gasoline market where firms are vertically integrated through refinery and retail markets. We rank these two market structures in terms of ease of collusion and show that while under a reasonable collusive sharing rule collusion is not possible in the market with one vertically integrated firm, collusion is possible in the market structure with two vertically integrated firms. We conclude that vertical multimarket (multilevel) contact facilitates collusion and if vertical mergers are suspected to lead to subsequent vertical mergers in an industry, then they should receive higher antitrust scrutiny relative to single isolated vertical mergers. [ABSTRACT FROM AUTHOR]

It has been argued that retail gasoline prices adjust more quickly to crude oil price increases than to price decreases. We investigate this issue using the statewide data on weekly retail gasoline prices in the United States between January 2000 and June 2007. Our analysis does not confirm the prediction that gasoline prices adjust more quickly to price increases in crude oil prices. On the contrary, the results suggest that in some geographic areas gasoline prices could change faster when crude oil prices decrease. These findings suggest that a national or a one size fits all energy policy for the United States may be misguided. [ABSTRACT FROM AUTHOR]