Wlazlowski, Szymon and Binner, Jane and Giulietti, Monica and Joseph, Nathan (2006): Non-linearities in mark-up on costs. Published in: Aston Working Papers No. 2006 (2006): pp. 1-21.
Download (264kB) | Preview
Abstract This study employs an error-correction SETAR model to analyse the non-linearities in the behaviour of the mark-up on costs charged by the filling stations in the New York metropolitan area. While usual price transmission gained significant attention in the literature, the mark-up portion of the price has not been analysed to date. The results indicate that the adjustment to mark-ups to their long run values is non-linear, but the speeds with they adjust to their long-run values are equal across regimes for two out of three series analysed. For one of the series the adjustment is beneficial for the end consumers such that prices fall faster than they rise. The findings are somewhat surprising, indicating that there is no need for government intervention in the NY petroleum market.
|Item Type:||MPRA Paper|
|Institution:||Aston Business School|
|Original Title:||Non-linearities in mark-up on costs|
|Keywords:||Rockets and feathers; asymmetry; petroleum; SETAR|
|Subjects:||Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q40 - General
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
D - Microeconomics > D4 - Market Structure and Pricing > D40 - General
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection
|Depositing User:||Szymon Wlazlowski|
|Date Deposited:||14. Jan 2007|
|Last Modified:||12. Feb 2013 13:03|
A. Abdulai (2002). ‘Using Threshold Cointegration to Estimate asymmetric Price Transmission in the Swiss Pork Market’. Applied Economics Letters (6):467–470. L. Bachmeier & J. Griffin (2003). ‘New evidence on asymmetric gasoline price responses’. The Review of Economics and Statistics 85(3):772–776. R.W. Bacon (1991). ‘Rockets and feathers: the asymmetric speed of adjustment of UK retail gasoline prices to cost changes’. Energy Economics pp. 211–218. N. Balke, et al. (1998). ‘Crude oil and gasoline prices: an asymmetric relationship?’. Economic and Financial Policy Review (Q 1):2–11. available at http://ideas.repec.org/ a/fip/fedder/y1998iq1p2-11.html. A. Banarjee (1993). Co-integration, error correction, and the econometric analysis of non-stationary data. Oxford University Press. S. Borenstein, et al. (1997). ‘Do Gasoline Prices Respond Asymmetrically to Crude Oil Changes’. Quarterly Journal of Economics 112:305–339. Competition Bureau (1997). Discontinued inquiries concerning Canada’s gasoline industry: Report by Competition Bureau. Gatineau, Quebec. S. v. Cramon-Taubadel & J. Mayer (2001). ‘Asymmetric Price Transmission: Fact or Artefact?’. Paper prepared for the 71th EAAE Seminar The food consumer in the early 21st century in Zaragoza, Spain, 19-20 April 2001. K. T. Duffy-Deno (1996). ‘Retail price asymmetries in local gasoline markets’. Energy Economics (18):81–92. E. Eckert (2002). ‘Retail Prices cycles and response asymmetry’. Canadian Journal of Economics, Vol.35, No.1, 52-77 35(1):52–77. Energy Information Agency (1999). ‘Price changes in the gasoline market: Are Midwestern gasoline prices downward sticky?’. DOE (626):55+. R. Engle & C. Granger (1987). ‘Cointegration and Error Correction: Representation Estimation and Testing’. Econometrica 55(2):251–276. G. Frey & M. Manera (2005). ‘Econometric Models of Asymmetric Price Transmission’. Working Papers 2005.100, Fondazione Eni Enrico Mattei. available at http://ideas.repec.org/p/fem/femwpa/2005.100.html. General Accounting Office (1993). Energy security and policy: Analysis of the pricing of crude oil and petroleum products: Report by General Accounting Office. Washington, DC. J. Geweke (1978). ‘Temporal aggregation in the multiple regression model’. Econometrica 46:643–662. R. Godby, et al. (2000). ‘Testing for asymmetric pricing in the Canadian retail gasoline market’. Energy Economics (22):251–276. B. E. Hansen (1996). ‘Inference When a Nuisance Parameter Is Not Identified Under the Null Hypothesis’. Econometrica 64(2):413–430. B. E. Hansen (1997). ‘Inference in TAR models’. Studies in Nonlinear Dynamics and Econometrics 2:1–22. J. Karrenbrock (1991). ‘The Behaviour of Retail Gasoline Prices: Symmetric or Not?’. Federal Reserve Bank of S.T. Louis pp. 19–29. E. Maskin & J. Tirole (1988). ‘A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles’. Econometrica 56(3):571–99. available at http://ideas.repec.org/a/ ecm/emetrp/v56y1988i3p571-99.html. Monopolies and Mergers Comission (1990). The Supply of Petrol: Monopolies and Mergers Comission Report. HMSO, London. Office of Fair Trading (1998). Competition in the Supply of Petrol: Office of Fair Trading Report. OFT, London. P. C. B. Phillips & S. Ouliaris (1990). ‘Asymptotic Properties of Residual Based Tests for Cointegration’. Econometrica 58(1):165–93. available at http://ideas.repec.org/a/ecm/ emetrp/v58y1990i1p165-93.html. S. Radchenko (2005a). ‘Lags in the response of gasoline prices to changes in crude oil’ available at http://126.96.36.199/eps/em/ papers/0406/0406001.pdf. S. Radchenko (2005b). ‘Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases’. Energy economics 27(5):708– 730. B. Reilly & R. Witt (1998). ‘Petrol Price Asymmetries Revisited’. Energy Economics (20):297–308. RFA (2006). ‘Changes in Gasoline and the Automobile Service Technician’. Report, Renewable Fuels Association. available at www.ethanolrfa.org/objects/ pdf/AboutRFA/Gasoline.pdf. D. Shin (1992). Do Product Prices Respond Symmetrically to Changes in Crude Prices? American Petroleum Institute. H. Tong (1978). ‘On a threshold model’. Pattern Recognition and Signal Processing pp. 101–141. H. Tong & K. S. Lim (1980). ‘Threshold Autoregression, Limit Cycles and Cyclical Data’. Journal of the Royal Statistical Society. Series B (Methodological) 42(3):245–292. R. Tsay (1998). ‘Testing and Modeling Multivariate Threshold Models’. Journal of the American Statistical Association 93(443):1188–1202.