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Title:
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Asymmetric price adjustments: A supply side approach
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Author:
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Antoniou, Fabio; Fiocco, Raffaele; Guo, Dongyu
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Other authors:
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Universitat Rovira i Virgili. Departament d'Economia |
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Abstract:
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Using a model of dynamic price competition, we provide an explanation from the supply
side for the well-established observation that output prices react faster in response to input
cost increases than to decreases. When costs decline, the opportunity of pro table storing in
anticipation of higher future costs allows competitive fi rms to coordinate on prices above current
marginal costs. The initial price response is only partial and pro table storing relaxes competition.
Conversely, when costs rise, storing is not benefi cial in anticipation of lower future costs
and fi rms immediately adjust their prices to current marginal costs, which entails the standard
Bertrand outcome. Our results shed new light on the empirical evidence about asymmetric
pricing and can stimulate further empirical investigation on this puzzle.
Keywords: Asymmetric price adjustments, Bertrand-Edgeworth competition, Storage, Gasoline
market.
JEL Classifi cation: D4, L1. |
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Publication date:
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2017 |
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Subject (UDC):
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338 - Situació econòmica. Política econòmica. Gestió, control i planificació de l'economia. Producció. Serveis. Turisme. Preus |
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Subject(s):
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Preus -- Fixació |
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Rights:
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L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons: http://creativecommons.org/licenses/by-nc-nd/4.0/ |
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Pages:
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36 p. |
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Document type:
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Working Paper |
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Published by:
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Universitat Rovira i Virgili. Centre de Recerca en Economia Industrial i Economia Pública
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Collection:
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Documents de treball del Departament d'Economia;2017-13
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