ARTICLE: Retail Gasoline Price Cycles Across Spatially Dispersed Gasoline Stations * Skip over navigation
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Copyright (c) 2004 The University of Chicago
The Journal of Law & Economics

ARTICLE: Retail Gasoline Price Cycles Across Spatially Dispersed Gasoline Stations *

* The authors thank In-Touch Software Corporation for providing free-of-charge data collected through The authors also wish to thank Dennis Carlton and an anonymous referee for their helpful comments, seminar participants at the University of Calgary and conference participants at the International Industrial Organization conference for suggestions, McKay White for research assistance, and the Social Sciences and Humanities Research Council and the University of Alberta for financial support of this research.

April, 2004

47 J. Law & Econ. 245





VOLATILITY in retail gasoline prices has been the subject of intense government scrutiny and public concern in Canada and other countries. Much attention has been focused on high-frequency cycles in retail gasoline prices, in which prices jump up by large amounts over 1 or 2 days and decrease over a period of weeks. Because these cycles often feature dramatic price increases across entire cities, there have been allegations that they indicate collusion among retailers. 1 Investigations have also been conducted into whether these cycles, in which retail prices may fall near or below observable wholesale prices, indicate predatory behavior by integrated refiners. For example, the Competition Bureau of Canada concluded in 2001 that retail price cycles in Vancouver represent intense competition as opposed to predatory behavior. 2

Unfortunately, studies of volatility in retail gasoline prices have been extremely limited in terms of the available data. Most studies of price cycles in Canada have used weekly retail prices averaged across a small sample of stations within a city to document week-to-week price fluctuations and to study the relationship between retail prices and wholesale prices. The small number of gasoline price studies using daily station-specific observations on prices have been limited to a small number of stations within a city. Studies of price volatility have been hampered to date by their inability to consider the cross-sectional pattern of prices within a large geographic area.

This paper will use a data set of daily observations on station-specific ...
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