American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Learning to Coordinate: A Study in Retail Gasoline
American Economic Review
vol. 109,
no. 2, February 2019
(pp. 591–619)
Abstract
This paper studies equilibrium selection in the retail gasoline industry. We exploit a unique dataset that contains the universe of station-level prices for an urban market for 15 years, and that encompasses a coordinated equilibrium transition mid-sample. We uncover a gradual, three-year equilibrium transition, whereby dominant firms use price leadership and price experiments to create focal points that coordinate market prices, soften price competition, and enhance retail margins. Our results inform the theory of collusion, with particular relevance to the initiation of collusion and equilibrium selection. We also highlight new insights into merger policy and collusion detection strategies.Citation
Byrne, David P., and Nicolas de Roos. 2019. "Learning to Coordinate: A Study in Retail Gasoline." American Economic Review, 109 (2): 591–619. DOI: 10.1257/aer.20170116Additional Materials
JEL Classification
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L12 Monopoly; Monopolization Strategies
- L13 Oligopoly and Other Imperfect Markets
- L71 Mining, Extraction, and Refining: Hydrocarbon Fuels
- L81 Retail and Wholesale Trade; e-Commerce
- Q35 Hydrocarbon Resources