Sticky prices, inventories, and market power in wholesale gasoline markets. From: RAND Journal of Economics | Date: March 22, 2002| Author: Borenstein, Severin; Shepard, Andrea | COPYRIGHT 2002 Rand, Journal of Economics. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group.Copyright information

A model with costly adjustment of production and costly inventories implies that wholesale gasoline prices will respond with a lag to crude oil cost shocks. Unlike explanations that rely upon menu costs, imperfect information, or long-term buyer/seller relationships, this model also predicts that futures prices for gasoline will adjust incompletely to crude oil price shocks that occur close to the expiration date of the futures contract. We test and confirm this implication. Examin...

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