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Activity Number:
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118
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Type:
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Contributed
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Date/Time:
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Monday, August 3, 2009 : 8:30 AM to 10:20 AM
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Sponsor:
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Section on Statistics and Marketing
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| Abstract - #305347 |
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Title:
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Dynamic Pricing and Asymmetries in Retail Gasoline Markets: What Can They Tell Us About Price Stickiness?
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Author(s):
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Ana Maria Herrera*+ and Christopher Douglas
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Companies:
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Wayne State University and University of Michigan-Flint
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Address:
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656 W Kirby, 2095 FAB, Detroit, MI, 48202,
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Keywords:
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discrete valued time series ; price adjustment ; sticky prices ; gasoline prices
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Abstract:
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Using an autoregressive conditional binomial model and a data set consisting of daily price and cost observations for 15 Philadelphia retail gasoline stations, we test the empirical implications of price adjustment theories spanning three general categories of price stickiness: menu costs, information processing delays, and strategic considerations. We find evidence of time dependence and asymmetry in a station's pricing decision. Specifically, a station is more likely to make a string of successive price decreases over a string of successive price increases. In addition, stations are more likely to make a large price increase over a large price decrease. We argue that this behavior is consistent with the idea of "search costs," which is an information processing delay on the part of consumers.
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