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FoolWatch - Further Discussion of Econometric Analysis Undertaken By ACCC

Harding, Don (2008): FoolWatch - Further Discussion of Econometric Analysis Undertaken By ACCC.

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Using data supplied by InformedSources I find additional flaws in the ACCC analysis of FuelWatch. First, the drop in petrol prices that is so visually convincing in the ACCC chart S1 is in fact an artifact of the method of data construction and can be attributed primarily to increases in prices in Adelaide and Melbourne --- events that had nothing to do with Western Australia or FuelWatch. Second, redoing the analysis using Sydney as the point of reference and adding prices in other cities as explanatory variables lead to results that contradict ACCC findings. First I find that the two best models that I estimate yield the conclusion that Fuelwatch either increased petrol prices in Western Australia by a small amount or had no effect. Third, I find that the entry of Woolworths and Coles into the Western Australian market had the effect of reducing unleaded petrol prices Perth by about 2.67 per cent relative to Sydney.

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