Journal ArticleDOI
Selling Costs and Switching Costs: Explaining Retail Gasoline Margins
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In this paper, a number of cost-based explanations for such gasoline pricing, as well as the possibility of price discrimination were studied, and it was shown that gas stations discriminate against groups of customers who are less likely to switch to another station.Abstract:
Recent theoretical work has shown that price discrimination can take place in imperfectly competitive, as well as monopoly, markets. The persistence of higher retail margins on unleaded than on leaded gasoline during the 1980s suggests that discrimination may occur even in very competitive markets. This article studies a number of cost-based explanations for such gasoline pricing, as well as the possibility of price discrimination. The analysis indicates that gas stations discriminate against groups of customers who are less likely to switch to another station. The conclusions highlight the influence of shopping or search costs on pricing decisions, even in markets thought to be quite competitive.read more
Citations
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Journal ArticleDOI
Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes
TL;DR: In this paper, the authors test and confirm that retail gasoline prices respond more quickly to increases than to decreases in crude oil prices, which may reflect production/inventory adjustment lags and market power of some sellers.
Posted Content
Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes
Severin Borenstein,A. Cameron +1 more
TL;DR: This article found that retail gasoline prices react more quickly to increases in crude oil prices than to decreases, while wholesale gasoline prices exhibit no asymmetry in responding to crude oil price changes, indicating that refiners who set wholesale prices are not the source of the asymmetry.
Book
Industrial Organization: Markets and Strategies
Paul Belleflamme,Martin Peitz +1 more
TL;DR: In this article, the authors present an up-to-date account of modern industrial organization that blends theory with real-world applications, including product bundling, branding strategies, restrictions in vertical supply relationships, intellectual property protection, and two-sided markets.
Journal ArticleDOI
New evidence on asymmetric gasoline price responses
TL;DR: The authors used the standard Engle-Granger two-step estimation procedure, whereas Borenstein, Cameron, and Gilbert used a nonstandard estimation methodology and found no evidence of price asymmetry in wholesale gasoline prices.
Journal ArticleDOI
Estimating switching costs: the case of banking
Moshe Kim,Doron Kliger,Bent Vale +2 more
TL;DR: In this article, the authors present an empirical model of firm behavior in the presence of switching costs, embedded in firms' value maximization, to derive estimable equations of a first-order condition, market share (demand), and supply equations.
References
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Journal ArticleDOI
Monopolistic competition with outside goods
TL;DR: In this article, a model of spatial competition in which a second commodity is explicitly treated is presented, and it is shown that a zero-profit equilibrium with symmetrically located firms may exhibit rather strange properties.
Posted Content
Competition and Price Dispersion in the U.S. Airline Industry
Severin Borenstein,Nancy L. Rose +1 more
TL;DR: The authors analyzes dispersion in the prices that an airline charges to different customers on the same route and finds that the expected absolute difference in fares between two of an airline's passengers on a route averages thirty-six percent of the airline's average ticket price on the route.
Book
Competition and Price Dispersion in the U.S. Airline Industry
Severin Borenstein,Nancy L. Rose +1 more
TL;DR: In this paper, the authors study dispersion in the prices an airline charges to different passengers on the same route and show that the expected absolute difference in fares between two passengers on a route is 36 percent of the airline's average ticket price.
Posted Content
The Effects of Third-Degree Price Discrimination in Oligopoly
TL;DR: In this paper, Schmalensee et al. presented a simple duopoly model of a differentiated-products industry and showed that a firm's price elasticity of demand in a market can be expressed as the sum of two parts: the industry-demand elasticity and the cross-price elasticity.
Journal ArticleDOI
Price discrimination in free-entry markets
TL;DR: In this paper, the authors investigate price discrimination in free-entry, zero-profit markets and show that when brands are heterogeneous, competition does not prevent discrimination and that the power to earn economic profits is not necessary for a firm to maintain discriminatory prices.