Testing Parallel Pricing Behavior in the Polish Wholesale Fuel Market: an ARDL – Bound Testing Approach
Keywordswholesale fuel market, parallel pricing, cointegration
AbstractIn this study, we investigated whether the observed series of fuel prices can be compatible with a specific theoretical model of strategic player interaction. Our primary interest is in determining whether a parallel pricing policy, implied by a theoretical model of strategic interactions, can be an industry-observed pricing mechanism. Therefore, we first calculated various descriptive statistics of the price series to discover any common patterns of individual series. Next, we determined whether parallel co-movement of the price levels exist using an ARDL – bound testing approach. This study finds that if we restricted our research to the described pricing mechanism (IPP pricing based on previous day fundamentals), the players will have chosen the levels of price in a parallel mode; this excludes 2007, when LOTOS appeared to be the price leader.
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