TY - JOUR
T1 - Dynamic pricing and asymmetries in retail gasoline markets
T2 - What can they tell us about price stickinessα
AU - Douglas, Christopher C.
AU - Herrera, Ana María
PY - 2014/2
Y1 - 2014/2
N2 - Theoretical explanations for price stickiness used in businesses cycle models are diverse (e.g.,information processing delays, rational inattention and fair pricing), with each theory resulting in a different implication for inflation dynamics. Using an autoregressive conditional binomial model and a data set consisting of daily observations of price and cost for 15 Philadelphia retail gasoline stations, we test which of these theories is most consistent with the observed pattern of price adjustment. Our findings of time dependence, asymmetry and the role of cost volatility are consistent with a combination of fairness considerations and rational inattention by producers.
AB - Theoretical explanations for price stickiness used in businesses cycle models are diverse (e.g.,information processing delays, rational inattention and fair pricing), with each theory resulting in a different implication for inflation dynamics. Using an autoregressive conditional binomial model and a data set consisting of daily observations of price and cost for 15 Philadelphia retail gasoline stations, we test which of these theories is most consistent with the observed pattern of price adjustment. Our findings of time dependence, asymmetry and the role of cost volatility are consistent with a combination of fairness considerations and rational inattention by producers.
KW - Discrete valued time series
KW - Gasoline prices
KW - Price adjustment
KW - Sticky prices
UR - http://www.scopus.com/inward/record.url?scp=84890811846&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84890811846&partnerID=8YFLogxK
U2 - 10.1016/j.econlet.2013.11.025
DO - 10.1016/j.econlet.2013.11.025
M3 - Article
AN - SCOPUS:84890811846
SN - 0165-1765
VL - 122
SP - 247
EP - 252
JO - Economics Letters
JF - Economics Letters
IS - 2
ER -