New York mark-ups on petroleum products

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Forthcoming in The Manchester School, 2010.

Abstract: This paper analyzes rigidities in the behavior of the mark-up on regular, midgrade and premium varieties of petrol in the New York area using a set of weekly frequency data and a methodology that analyzes the pricing process using deterministic and stochastic techniques. The results are consistent across methodologies and indicate that the speeds of adjustment to the long run equilibrium mark-up differ across varieties of petrol with margins of the premium variety falling faster than they rise, contrary to the popular claim of welfare-decreasing asymmetries in price transmission.

Keywords: Asymmetric Price Transmission, Petroleum, SETAR model, Markov Switching model