Premium
Pricing Liquid Petroleum Gas in Mexico
Author(s) -
Brito Dagobert L.,
Littlejohn William Laney,
Rosellón Juan
Publication year - 2000
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2000.tb00285.x
Subject(s) - incentive , petroleum , economics , petroleum product , liquefied petroleum gas , construct (python library) , natural gas , microeconomics , financial economics , chemistry , organic chemistry , computer science , programming language
This paper considers the regulation of pricing of liquid petroleum gas in Mexico. We construct a model that incorporates all information essential to the pricing question and derive relationships that should hold between prices in Mexico and prices in world markets. Prices in Mexico can be tied to the readily observable prices in the United States by a netback rule. However, this rule can lead to incentives to increase the price of domestic liquid petroleum gas by diverting production from the regulated market.