Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110397
Authors: 
Antoniou, Fabio
Fiocco, Raffaele
Guo, Dongyu
Year of Publication: 
2015
Series/Report no.: 
SFB/TR 15 Discussion Paper 493
Abstract: 
Using a model of dynamic price competition, this paper provides an explanation from the supply side for the well-established observation that retail prices adjust faster when input costs rise than when they fall. The opportunity of profitable storing for the next period induces competitive firms to immediately increase their prices in anticipation of higher future input costs. This relaxes competition and firms earn positive profits. Conversely, when input costs are expected to decline, firms adjust their prices only after a cost reduction materializes, and the firms' incentives for price undercutting lead to the standard Bertrand outcome.
Subjects: 
Asymmetric price adjustments
Bertrand-Edgeworth competition
Storage
Gasoline
JEL: 
D4
L1
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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