Tacit collusion : evidence of price leadership and sticky downward pricing in retail gasoline markets Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/qf85nf292

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  • In this study, I test for tacit collusion in retail gasoline markets by testing for sticky downward pricing and price leadership. Using an extensive dataset consisting of twenty-five gasoline markets located in the greater Willamette Valley region of Oregon, I find evidence of sticky downward pricing in every market. I also find strong evidence that suggests several firms are using a price leader to coordinate prices. Further analysis suggests that the firms using a price leader to coordinate prices do not earn a greater average margin when compared to firms that do not coordinate prices with a price leader. Using past estimates of own-price elasticity for retail gas stations, I project the profit-maximizing price that station could charge and find that it is below the observed price charged by every station in every market. This result suggests that the tacit collusion observed in these markets is not an attempt by gas station managers to earn anti-competitive profits.
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