
General Economic Influences
 Demand: Price, Income, Price/availability of
substitutes and complements, Market size (pop),
Quality attributes, …
 Supply: Price, Price of Inputs (materials, …),
Technology, Competitive/Strategic Influences…
Supply: OPEC
Supply: Oil exploration+Tech
Demand:
China-India
Gas Buddy Map
coefficient
-0.5
3.7
0.7
-0.9
p-value
0.01
0.01
0.01
0.45
Pop2
pop density
0.3
6e-3
0.03
0.01
(popdensity)2
4e-7
0.01
2e-2
0.01
8e-5
5
5
4
0.17
0.03
0.15
0.05
Intercept
Oil Price ($)
State Tax (cents)
Pop (mil)
Distance
Production (mi)
Distance Pipeline
(mi)
Refinery
BG
KY






Crude oil $10 increase
3.7 cent gas
State Tax $10 cent increase
7 cent gas
Production 100 miles increase
2 cent gas
Kentucky
4 cent increase
BG
not sig different from zero
Omitted Variables: Distribution network
complexities; strategic pricing; …
Nakamura Studies: Only 16% price changes fundamentals driven
(higher with raw materials key)

Consumer Preferences & Transactions Costs
 Golden Gate Bridge; Disney; SW Bell (price as
product attribute)
 NYSE; Supermarkets (smoothing v. inventory)

Fixed Costs
 Pharmaceutical Drugs v. Supermarkets
 Cable Bundling (+ price discrimination)

Uncertainty
 Long Run: MLB, Apple
 Short Run: Selling Bagels


NYSE Specialist
Supermarkets