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Price effects of calling out market power: A study of the COVID‐19 oil price shock
Author(s) -
Barkley Aaron,
Byrne David P.,
Wu Xiaosong
Publication year - 2022
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12485
Subject(s) - market power , shock (circulatory) , event study , business , covid-19 , monetary economics , price discovery , power (physics) , economics , price fixing , oil price , market price , financial economics , microeconomics , industrial organization , collusion , monopoly , context (archaeology) , futures contract , pathology , biology , paleontology , quantum mechanics , medicine , physics , disease , infectious disease (medical specialty)
Abstract Governments often make public announcements that call into question firms' misuse of market power. Yet little is known about how firms respond to them. We study gasoline retailers' price responses to antitrust announcements shaming them for price gouging during the COVID‐19 pandemic. We identify price effects using a high‐frequency event‐study leveraging unique real‐time station‐level price data and well‐identified, discrete antitrust announcements. We find evidence of announcement effects that depend on firms' preannouncement margins and hence exposure to being publicly shamed. Public statements by antitrust questioning firms' misuse of market power can indeed contain signals that affect equilibrium outcomes.