A PYMNTS Company

Detecting Edgeworth Cycles

By  |  October 10, 2021

By Timothy Holt (Università della Svizzera italiana), Mitsuru Igami (Yale University) & Simon Scheidegger (University of Lausanne)

We propose algorithms to detect “Edgeworth cycles,” asymmetric price movements that have caused antitrust concerns in many countries. We formalize four existing methods and propose six new methods based on spectral analysis and machine learning. We evaluate their accuracy in datasets of station-level daily gasoline prices from Western Australia, New South Wales, and Germany. Most methods achieve high accuracy in the first two, but only a few can detect nuanced cycles in the third. Results suggest whether researchers find a positive or negative statistical relationship between cycles and markups, hence their policy implications, crucially depends on the choice of methods.

Continue Reading…