How do consumers respond to gasoline price cycles?

David P. Byrne, Gordon W. Leslie, Roger Ware

Research output: Contribution to journalArticleResearchpeer-review

12 Citations (Scopus)

Abstract

This paper empirically studies how consumers respond to retail gasoline price cycles. Our analysis uses new station-level price data from local markets in Ontario, Canada, and a unique market-level measure of consumer responsiveness based on web traffic from gasoline price reporting websites. We first document how stations use coordinated pricing strategies that give rise to large daily changes in price levels and dispersion in cycling gasoline markets. We then show consumer responsiveness exhibits cycles that move with these price fluctuations. Through a series of tests we find that forward-looking stockpiling behavior by consumers plays a central role in generating these patterns.

Original languageEnglish
Pages (from-to)115-147
Number of pages33
JournalEnergy Journal
Volume36
Issue number1
DOIs
Publication statusPublished - 1 Jan 2015
Externally publishedYes

Keywords

  • Consumer search
  • Dynamic demand
  • Retail gasoline price cycles

Cite this