The gasoline Industry in European Union and the USA

Polemis, Michail and Fotis, Panagiotis (2011): The gasoline Industry in European Union and the USA.

Abstract

This paper explores whether asymmetric pricing can be identified in the eleven euro zone countries (Austria, Belgium, Finland, Greece, France, Germany, Ireland, Italy, Netherlands, Portugal and Spain) by utilizing Error Correction Model on the weekly price changes in order to assess current and future potential. The sample spans from July 1996 to August 2011. We also try to analyze the effect of competition on the dynamic adjustment of gasoline price to which has been paid scant attention in the past. The results favor the common perception that retail gasoline prices respond asymmetrically to cost increases and decreases both in the long and the short-run. At the wholesale segment, there is a symmetric response of the spot prices of gasoline towards the adjustment to the short-run responses of the exchange rate.

• Item Type: MPRA Paper
• Language: English
• Keywords: asymmetric pricing; euro zone countries; dynamic ordinary least squares; error correction model; unit root; Cointegration techniques; gasoline prices; competition; oil industry
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms

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