Quotation Pennerstorfer, Dieter, Weiss, Christoph, Yontcheva, Biliana. 2016. Frequency of Price Adjustment and Market Power.


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Abstract

The present paper analyzes the role of market power in determining the frequency of price adjustment using daily data on retail prices for a major Austrian gasoline retailer. In particular, we investigate the effects of consumer information, production costs and competitive pressure on the likelihood of frequent price changes using survival analysis. In light of recent regulatory attempts on the retail gasoline market, the present paper complements the literature dealing with the speed of adjustment by specifically focusing on the duration of stable prices (the subject of the aforementioned regulation). Similarly to findings of the literature on the speed of adjustment we observe that negative cost shocks lead to a lower frequency of price changes than cost increases. Furthermore, we find support for consumer search theories, which suggest that the share of informed consumers increases the frequency of price changes and decreases pass-through asymmetry. Weak evidence for theories of tacit collusion is also present in the data.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Frequency of Price Adjustment and Market Power
Year 2016
URL https://www.dropbox.com/s/k18nl14xt1yl7dz/2016_10_25_Commuting%20and%20Price%20Adjustment_by.pdf?dl=0
JEL D43; D83; L13; R32

Associations

People
Pennerstorfer, Dieter (Former researcher)
Weiss, Christoph (Details)
Yontcheva, Biliana (Details)
Organization
Institute for Economic Policy and Industrial Economics IN (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5300 Economics (Details)
5370 Industrial economics (Details)
5618 Regional economy (Details)
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