Price Dispersion in the Local Gasoline Market
Addendum to my earlier post on price spreads in the local gasoline markets:
I noted in that posting that price ranged from $1.11 to $1.29 per litre on the day that I checked the prices.
This morning, the prices at the same stations ranged between $1.05 and $1.10 per litre, which is exactly the result observed in simulations when a market in equilibrium experiences a set of shocks -- a big price spread initially followed by convergence toward a new equilibrium.
Most likely the cause of the initial wide dispersion was imperfect information and uncertainty.
p.s.: before Katrina, these stations were charging between $.98 and $1.02 per litre.
I noted in that posting that price ranged from $1.11 to $1.29 per litre on the day that I checked the prices.
This morning, the prices at the same stations ranged between $1.05 and $1.10 per litre, which is exactly the result observed in simulations when a market in equilibrium experiences a set of shocks -- a big price spread initially followed by convergence toward a new equilibrium.
Most likely the cause of the initial wide dispersion was imperfect information and uncertainty.
p.s.: before Katrina, these stations were charging between $.98 and $1.02 per litre.
posted by EclectEcon @ 9/15/2005 11:27:00 a.m.
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