This paper aims to shed new light on ”law of one-price” in the United States’ gasoline market over the period June-2003-December-2019. Specifically, we test for convergence of the retail prices of gasoline in di↵erent US PADDs, states and cities using the Local Whittle estimator (LW) and its variants (Robinson 1995, Shimotsu and Phillips 2005). Mean/trend reversion of the relative price of each unit will imply convergence toward the average price in the US thereby offering support for the law of one-price. LW estimators allow us to consider the case where relative gasoline price are fractionally integrated process and may display long memory implying a slow process of convergence. The results obtained generally o↵er support for the law of one-price albeit with significant di↵erences in the rate of convergence between PADDs, States and Cities.
Testing the law of one-price in the US gasoline market: a long memory approach
Gianluigi De Pascale
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2022-01-01
Abstract
This paper aims to shed new light on ”law of one-price” in the United States’ gasoline market over the period June-2003-December-2019. Specifically, we test for convergence of the retail prices of gasoline in di↵erent US PADDs, states and cities using the Local Whittle estimator (LW) and its variants (Robinson 1995, Shimotsu and Phillips 2005). Mean/trend reversion of the relative price of each unit will imply convergence toward the average price in the US thereby offering support for the law of one-price. LW estimators allow us to consider the case where relative gasoline price are fractionally integrated process and may display long memory implying a slow process of convergence. The results obtained generally o↵er support for the law of one-price albeit with significant di↵erences in the rate of convergence between PADDs, States and Cities.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
