Media, political pressure, and the firm: the case of petroleum pricing in the late 1970's
Quarterly Journal of Economics
Erfle, Stephen~McMillan, Henry
Copyright (c) 1990
Abstract: A study empirically examined whether major domestic oil companies held down product prices relative to their less visible counterparts during the 1979 oil crisis. Company prices on unregulated fuel oil were compared with a measure of political pressure - the level of television coverage of the energy crisis. The price data were weekly, company-specific, wholesale prices obtained from the Oil Buyers’ Guide for the period 1977-1980. The results show that media coverage influenced home heating oil price ratios, but did not influence residual fuel oil price ratios for the same companies. It is argued that this differential pricing pattern is rational in a politically sensitive period. In noncrisis years, TV coverage of the oil industry did not have an effect on pricing decisions. An enhanced version of economic efficiency that accounts for regulatory threats can provide valuable insights into the economic adjustment process in a democratic society.