Retail price asymmetries in local gasoline markets

The experience of the Salt Lake City retail gasoline market during the 1989 to 1993 period suggests that there was asymmetric adjustment. Wholesale and retail price data, unique to the Salt Lake market, are used to test for the existence of three types of price asymmetry during this period. With respect to the magnitude of the pass through of wholesale price changes, evidence of price asymmetry during periods of average weekly wholesale price changes is found. However, during market shocks, the evidence points in the direction of retail price symmetry. Evidence of asymmetry with respect to the timing and pattern of the retail price response is found for periods of both average and market shock changes. Since gasoline is purchased by the consumer in local markets, conclusions reached by studies of market pricing behaviour that rely on national data may not be relevant for local policy decisions. This appears to be the case for the Salt Lake City market.