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Transportation oil demand, consumer preferences and asymmetric prices

Broadstock, DC, Collins, A and Hunt, LC (2011) Transportation oil demand, consumer preferences and asymmetric prices Journal of Economic Studies, 38 (5). 528 - 536. ISSN 0144-3585

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Abstract

Purpose – The aim of this paper is to establish the role of asymmetric price decompositions in UK road transportation fuel demand, make explicit the impact of the underlying energy demand trend, and disaggregate the estimation for gasoline and diesel demand as separate commodities. Design/methodology/approach – Dynamic UK transport oil demand functions are estimated using the Seemingly Unrelated Structural Time Series Model with decomposed prices to allow for asymmetric price responses. Findings – The importance of starting with a flexible modelling approach that incorporates both an underlying demand trend and asymmetric price response function is highlighted. Furthermore, these features can lead to different insights and policy implications than might arise from a model without them. As an example, a zero elasticity for a price-cut is found (for both gasoline and diesel), implying that price reductions do not induce demand for road transportation fuel in the UK. Originality/value – The paper illustrates the importance of joint modelling of gasoline and diesel demand incorporating both asymmetric price responses and stochastic underlying energy demand trends.

Item Type: Article
Additional Information: This article is © Emerald Group Publishing and permission has been granted for this version to appear here. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.
Divisions: Faculty of Business, Economics and Law > Economics
Depositing User: Symplectic Elements
Date Deposited: 27 Jun 2012 11:26
Last Modified: 23 Sep 2013 19:21
URI: http://epubs.surrey.ac.uk/id/eprint/380518

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