SMU SOE Seminar Series (May 17, 2024): Consumer Search and Price Adjustment: Evidence from the Distribution of Retail Gasoline Prices

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ABSTRACT Consumer search theory provides an explanation for the existence of non-degenerate price distributions for identical products. Recently, several theoretical studies also used the theory to explain asymmetric adjustments of retail prices to cost shocks. Some of them make predictions that relate the degree of price dispersion to cost or price levels, movements of prices or costs, and search intensity. This paper examines price dispersion in the retail fuel market in South Korea to empirically evaluate some of the predictions. With regression analysis of the variance of retail fuel prices, I find that the dispersion of retail fuel prices is inversely related to wholesale fuel prices. I also find that price dispersion rises both when prices are rising and falling. These findings support some of the predictions and repudiate some others, with one question about consumer search behavior unanswered: whether consumers search more when prices are high or rising versus when prices are low or falling. Click here to view the CV.
		PRESENTER Jungwon Yeo Pusan National University
		RESEARCH FIELDS Industrial Organization Health Economics Applied Microeconomics Structural Estimation
		DATE: 17 May 2024 (Friday)
		TIME: 10am - 11.30am
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903

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