Working Papers in Economics,
University of Bergen, Department of Economics

Abstract: This paper studies price leadership and coordination in the retail gasoline market. Its main contribution is to show how firms use price leadership to both agree on and sustain a new margin-increasing equilibrium in a market free of price regulations. A unique dataset spanning 13.5 years with exact timing of price changes for almost all Norwegian gasoline stations is employed to study a transition led by the largest chain from irregular price jumps to weekly Monday price jumps, and later a transition led by the second largest chain to weekly additional Thursday price jumps. The transition to regular Thursday price jumps occurred a few months after a merger that increased the second-largest chain’s market share, indicating that the merger contributed to the transition. The transition to Monday price jumps shows no substantial effect on margins, while the additional Thursday price jump has an economically large positive effect.

Keywords: price leadership; coordination; retail gasoline; price cycles; equilibrium transition; competition policy

JEL-codes: K21; L13; L41; L81

67 pages, October 7, 2019

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