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PRICE MATCHING AND THE DOMINO EFFECT IN A RETAIL GASOLINE MARKET |
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| Authors: | BENJAMIN ATKINSON REW ECKERT and DOUGLAS S WEST |
| Institution: | Atkinson:;Senior Economist, Economic Policy and Enforcement Branch, Competition Bureau, 50 Victoria Street, Gatineau, Quebec, Canada K1A 0C9. Phone 819-953-8980, Fax 819-953-6400, E-mail Eckert:;Associate Professor, Department of Economics, University of Alberta, Edmonton, Alberta, Canada T6G 2H4. Phone 780-492-3959, Fax 780-492-3300, E-mail West:;Professor, Department of Economics, University of Alberta, Edmonton, Alberta, Canada T6G 2H4. Phone 780-492-7646, Fax 780-492-3300, E-mail |
| Abstract: | Using gasoline station price data collected eight times per day for 103 d for 27 stations in Guelph, Ontario, it is found that, consistent with an informal theory of competitive gasoline pricing, stations set prices to match a small number of other stations. However, these matched stations are not necessarily the closest. While retailers frequently respond to price changes within 2 h, many take considerably longer. Finally, while price decreases do ripple across the market like falling dominos, increases propagate across the city based more on geographic location and source of price control than on proximity to leaders of these increases. ( JEL L13, L40, L81) |
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