A tale of two cities: Price uniformity and price volatility in gasoline retailing

Retail gasoline markets have been found to exhibit either price volatility and price dispersion or price rigidity and uniformity across large metropolitan areas. The purpose of this paper is to identify a theoretical explanation for these patterns of pricing behavior, and to look for evidence consistent with the theory by examining market structure, conduct, and spatial pricing patterns in different retail gasoline markets in Canada. The study utilizes a novel source of price data: price observations reported to internet data collection sites. The firm and station specific price data are consistent with the presence of tacitly collusive behavior in one retail gasoline market and the presence of maverick retailers that prevent tacit collusion in the other retail market.The authors thank In-Touch Software Corporation for providing free of charge data collected through www.gastips.com, and Derek Tam and Glen Gower for providing free of charge data collected through www.ottawagasprices.com. The authors also wish to thank Roger Stough and anonymous referees for helpful advice, Don Schunk and participants at the 48th North American Meetings of the Regional Science Association International for their comments, and Ryan Reichl and Steven Yong for research assistance. Financial support provided by the Social Sciences and Humanities Research Council of Canada and the University of Alberta are gratefully acknowledged.