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.