| Summary: | This thesis uses spatial and temporal fluctuations in retail gasoline prices to study the effects of competition on pricing behavior and how government-mandated price restrictions impact consumers.
We use hourly price data for more than 16,500 gas stations in Austria and Germany (more than 90% of the market), collected since April 2012. This data is supplemented with manually recorded demand data for selected gas stations as well as traffic data for all German highways, and is wholly unique.
We classify the price movement of different gas stations by employing dynamic time warping and k-means clustering. We find that there are brand-specific pricing patterns prevailing in the German gasoline market. This suggests that there is no single dominant strategy for intertemporal price discrimination in the market. Pricing pattern deviations are highly correlated across Aral (BP) and Shell, suggesting that the each brand dynamically adjusts its prices in response to the other.
Secondly, we analyze nation-wide price fluctuations, cross-network price patterns, and price competition between gas stations that directly compete for motorists. One possible explanation for the observed price fluctuations is asymmetric information. To test this prediction, we model consumers as being informed or uninformed about the prices of all gas stations. The model illustrates that the high prices observed during the morning hours can be explained by fewer informed consumers traveling in the morning compared to the evening.
Finally, we estimate price elasticities for different groups of consumers. The data suggest that the pricing behavior observed in the Austrian and German markets cannot be explained as pure demand shocks. Rather, gas stations temporally price discriminate: in Germany, gas stations set high prices for price-inelastic business / morning consumers and low prices for the highly elastic leisure / evening consumers. In Austria, governmental regulation prevents gas stations from replicating the patterns in Germany. This leads to unintended consequences: consumers face a less volatile price with higher daily minima in Austria, forcing price-sensitive consumers to refill at higher average prices.
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