Professors write paper on competitive gas prices
Released: December 6, 2005
A study by two University of Wisconsin – Whitewater business professors on retail gasoline prices has garnered attention by the Federal Trade Commission (FTC). The FTC has invited Mark Skidmore, chair of the economics department, and Jimmy Peltier, Irvin L. Young professor of entrepreneurship and professor of marketing, to present their research at a Bureau of Economics seminar in Washington D.C., tentatively scheduled for February 2006.
“It is gratifying to know that the fine work being done by our faculty is being utilized to better understand the issue of ‘sales-below-cost’ legislation,” said Chris Clements, dean of the college of business and economics. “I am pleased that this work by Peltier and Skidmore has garnered the attention it deserves in this debate.”
Sales-below-cost legislation is an attempt to equalize the retail gasoline market by setting a minimum sale gasoline pump price.
The paper, “Do state motor fuel sales-below-cost laws lower prices?,” discusses retail and wholesale gasoline prices, their mark-up and the structure of motor fuel markets. It challenges the belief that sales-below-cost laws are more likely to lead to higher prices by protecting smaller businesses. The data was collected from 50 states, 13 of which have adopted motor fuel sales-below-cost laws during the 20-year period from 1983-2002. Analysis shows that gasoline prices are about one cent lower five years after the law is imposed and the total number of gasoline outlets is greater in the presence of the law.
“It’s a very interesting policy question of what states do to foster competition in the retail gasoline market,” said Skidmore.
“No one else has done this before,” Peltier added. “We found that the laws actually protected the consumer.”
The FTC’s Bureau of Economics seminar is a collaboration of presentations discussing antitrust and consumer protection laws in an effort to continue to set guidelines for fair commerce.
The paper, published in the Journal of Urban Economics in 2005, was coauthored with James Alm, chair of the department of economics at Georgia State University.
For further information, contact Skidmore at (262) 472-1354 or skidmorm@uww.edu or Peltier at (262) 472-5474 or peltierj@uww.edu.
- Jonathan Kozlowski,kozlowskjd05@uww.edu
