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PRICE MATCHING AND THE DOMINO EFFECT IN A RETAIL GASOLINE MARKET
Author(s) -
ATKINSON BENJAMIN,
ECKERT ANDREW,
WEST DOUGLAS S.
Publication year - 2009
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2008.00149.x
Subject(s) - gasoline , domino effect , economics , matching (statistics) , competition (biology) , microeconomics , agricultural economics , market share , econometrics , monetary economics , finance , statistics , mathematics , ecology , biology , physics , nuclear physics , thermodynamics
Using gasoline station price data collected eight times per day for 103 d for 27 stations in Guelph, Ontario, it is found that, consistent with an informal theory of competitive gasoline pricing, stations set prices to match a small number of other stations. However, these matched stations are not necessarily the closest. While retailers frequently respond to price changes within 2 h, many take considerably longer. Finally, while price decreases do ripple across the market like falling dominos, increases propagate across the city based more on geographic location and source of price control than on proximity to leaders of these increases. ( JEL L13, L40, L81)