How to Reach the Paradise? Inside the Edgeworth Cycle and Why a Gasoline Station Is the First to Raise Its Price

Abstract

Competition in gasoline retailing is characterized by intraday price cycles in local markets worldwide. The literature describes these as corresponding to the well-known Edgeworth cycles. Previous research has mainly focused on analyzing cycles based on hourly, daily, or weekly average price data. We study the cycle initiation based on second-by-second data for one German town. We find that price considerations are not the main factors in determining which retailers raise prices first, how much they raise them, or whether they succeed. Brand affiliation is more important, and to a lesser extent, so are the services offered and location parameters.