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Rockets and Feathers in the German Gasoline Market: An Obituary

Using high-frequency data originating from a census of retail prices covering over 5,000 fuel stations in Germany, this paper employs an error correction model to document a change in the price setting behavior of retail gas stations in Germany following the introduction of a legally mandated on-line price portal in 2014. Prior to the introduction of the portal, positive asymmetry prevails, with prices following the ``rockets and feathers'' pattern documented in many commodity markets, particularly in retail markets for fuels. In the aftermath of the portal's introduction, by contrast, negative asymmetry is observed: fuel price decreases in response to refinery price decreases are stronger than fuel price increases due to refinery price increases. This reversal in price pass-through suggests welfare gains for consumers from increased market transparency.