The ACCC investigated the differential between Perth and eastern capital cities and found that FuelWatch had reduced the price differential. In this section I argue against that conclusion by reductio ad absurdum.
I calculate, using the weekly Informed Sources price data, the differential between Sydney and Melbourne and subject that price differential to the ACCC test; that is, the introduction of FuelWatch to WA, and also the introduction of Coles into WA. Results are shown in Table 4.
|
Constant |
FuelWatch |
Coles |
Adj-R2 |
||||
|---|---|---|---|---|---|---|---|
|
Weekly Average |
1.6786 |
(0.0000) |
–1.0446 |
(0.0002) |
0.0579 |
||
|
Weekly Average |
1.6786 |
(0.0000) |
–1.1809 |
(0.0003) |
0.2742 |
(0.4521) |
0.0567 |
Numbers in parenthesis are p-values. Standard errors are Newey-West corrected.
The ACCC-type test tells us that the introduction of FuelWatch into the WA market had the effect of reducing the petrol price differential between Sydney and Melbourne. That result is clearly absurd. It is pleasing, however, that the entry by Coles into the WA market had no effect on the Sydney–Melbourne price differential. That, of course, is the result that we would expect.