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MARKET POWER, VERTICAL INTEGRATION AND THE WHOLESALE PRICE OF GASOLINE -super-*

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  • JUSTINE S. HASTINGS
  • RICHARD J. GILBERT

Abstract

This paper examines empirically the relationship between vertical integration and wholesale gasoline prices. We use discrete and differential changes in the extent of vertical integration generated by mergers in West Coast gasoline refining and retailing markets to test for incentives to raise rivals' costs. The research design allows us to test for a relationship between vertical integration and wholesale prices, controlling for horizontal market structure, cost shocks and trends. We find evidence consistent with the strategic incentive to raise competitors' input costs. This suggests that vertical integration can have a significant impact on wholesale prices. Copyright Blackwell Publishing Ltd. 2005.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 53 (2005)
Issue (Month): 4 (December)
Pages: 469-492

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Handle: RePEc:bla:jindec:v:53:y:2005:i:4:p:469-492

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Cited by:
  1. Chemla, Gilles & Porchet, Arnaud & Aïd, René & Touzi, Nizar, 2011. "Hedging and vertical integration in electricity markets," Economics Papers from University Paris Dauphine 123456789/11029, Paris Dauphine University.
  2. Volodymyr Bilotkach & Kai Hüschelrath, 2013. "Airline Alliances, Antitrust Immunity, and Market Foreclosure," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1368-1385, October.
  3. Nikogosian, Vigen & Weigand, Jürgen, 2012. "Forward integration and market entry: Evidence from natural gas markets for household customers in Germany," ZEW Discussion Papers 12-062, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Ali Hortacsu & Chad Syverson, 2006. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Working Papers 06-21, Center for Economic Studies, U.S. Census Bureau.
  5. repec:ste:nystbu:06-23 is not listed on IDEAS
  6. Ayako Suzuki, 2006. "Vertical Integration in the U.S. Cable Industry," ISER Discussion Paper 0675, Institute of Social and Economic Research, Osaka University.
  7. Packalen, Mikko & Sen, Anindya, 2013. "Static and dynamic merger effects: A market share based empirical analysis," International Review of Law and Economics, Elsevier, vol. 36(C), pages 12-24.
  8. Martin Gaynor & Robert J Town, 2012. "Competition in Health Care Markets," The Centre for Market and Public Organisation 12/282, Department of Economics, University of Bristol, UK.
  9. Pennerstorfer, Dieter & Weiss, Christoph, 2013. "Spatial clustering and market power: Evidence from the retail gasoline market," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 661-675.
  10. Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009. "Generating Evidence to Guide Merger Enforcement," CPI Journal, Competition Policy International, vol. 5.
  11. Eichberger, Jürgen & Mueller-Langer, Frank, 2012. "On the Welfare Effects of Exclusive Distribution Arrangements," MPRA Paper 39691, University Library of Munich, Germany.
  12. Orley C. Ashenfelter & Daniel Hosken & Matthew C. Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," NBER Working Papers 19939, National Bureau of Economic Research, Inc.
  13. Lori Parcel, 2008. "Stiff Competition: Vertical Relationships in Cremation Services," Discussion Papers 07-041, Stanford Institute for Economic Policy Research.
  14. Kendix, Michael & Walls, W.D., 2010. "Oil industry consolidation and refined product prices: Evidence from US wholesale gasoline terminals," Energy Policy, Elsevier, vol. 38(7), pages 3498-3507, July.
  15. Enghin Atalay & Ali Horta?su & Chad Syverson, 2014. "Vertical Integration and Input Flows," American Economic Review, American Economic Association, vol. 104(4), pages 1120-48, April.

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