Price adjustments by a gasoline retail chain

We use daily data to examine price responses in the Swedish gasoline market to changes in the Rotterdam spot price, exchange rates and taxes. The dist ribution of price adjustments by a leading retail chain, for the period Jan uary 1980 to December 1996, is symmetric with no small adjustments. An erro r correction model shows that, in the short run, prices gradually move towa rds the long-run equilibrium in response to cost shocks. There is some evid ence that, also in the short run, prices are stickier downwards than upward s. Prices respond more rapidly to exchange rate movements than to the spot market price. Our analysis emphasizes that to fully understand price adjust ments it is necessary to examine data sets where the sample frequency at le ast matches that of price adjustments.