Competitive Price Cycles
- Author(s)
- Simon Martin, Karl Schlag, Kai Fischer
- Abstract
We develop a tractable model of competitive price cycles where prices are cho-
sen alternatingly and consumers have heterogenous information. The model yields
sharp empirical predictions about price patterns, impact of captive consumers and
pass-through. Using rich station-level price data from the German retail gasoline
market, we test these predictions. Consistent with the model, we find price cycles,
characterized by frequent small price cuts and infrequent sharp increases. These
cycles shorten as costs rise and are more likely to be initiated by firms with more
captive consumers. Pass-through of input costs is incomplete, in contrast to alter-
native theories- Organisation(s)
- Department of Economics
- External organisation(s)
- Wirtschaftsuniversität Wien (WU)
- Pages
- 1-24
- Publication date
- 2025
- Austrian Fields of Science 2012
- 502013 Industrial economics
- Keywords
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/9690cc3e-08b7-465d-b59d-6a40035cdd8c