How Retail Gasoline Price Responds to Cost Shocks : Evidence from Daily Data of Stations in Seoul Korea

We examine how daily retail prices of gasoline stations in Seoul Korea responded to changes in costs from 2009 to 2019. During the sample period we find a substantial shift in the composition of Seoul gas stations and in the pattern of pass-through of wholesale price increase and decrease. In 2009-2014 price adjustment of most stations exhibited a slight ``rockets and feathers'' type of ``speed asymmetry'': retail gasoline price rose faster after a wholesale price increase than it dropped after a wholesale price decrease. But in 2015-2019 we find an uncommon ``size asymmetry'': price rose about 0.8 unit after a unit cost increase but dropped by roughly 1 unit after a unit cost decrease. The uncommon size-asymmetry is most prevalent among stations that serve price conscious consumers, a market segment that experienced more intensive competition in 2015-19. We also find the retail price response to infrequent and large changes in fuel taxes differs from that to frequent cost shocks driven by daily oil price fluctuations