A duration analysis approach to the examination of the lengths of periods of price stability in the UK retail petrol industry

Abstract

This article applies duration analysis to pricing behaviour in an oligopolistic industry, namely the UK Retail Petrol Industry, for the period January 1983 to October 1989. The findings of the analysis are that: a period of rising or falling prices will reduce the lengths of price stability and that periods of price stability ending in March or April lasted longer than those ending in other months as firms awaited changes in the excise rate in the Budget. There was no evidence that the leading firm, Esso, exhibited longer periods of price stability, a result consistent with the hypothesis of conscious parallelism in pricing behaviour in an industry.