An Empirical Study of Asymmetric Pricing in Retail Gasoline and Diesel Markets in Taiwan, Japan, South Korea, and Singapore

Abstract

This study estimated retail price adjustments in the gasoline and diesel markets of Taiwan, Japan, South Korea, and Singapore using monthly data between 2004M1 and 2012M6. An asymmetric error correction model (ECM) was employed as a framework and the results showed that asymmetric adjustments in retail gasoline and diesel prices are common, and that the adjustments, which quickly and obviously responded to cost reductions, are a type of politico-economic asymmetry. This finding differs from the results of numerous international studies. In other words, although gasoline and diesel markets are evident oligopolies, the government’s intervention behavior appears to control the gasoline and diesel price adjustments of the 4 East Asian countries evaluated in this study (i.e., Taiwan, Japan, South Korea, and Singapore).