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Regulatory Restrictions on Vertical Integration and Control: The Competitive Impact of Gasoline Divorcement Policies

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  • Vita, Michael G
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    Abstract

    Gasoline "divorcement" regulations restrict the integration of gasoline refiners and retailers. Theoretically, vertical integration can harm competition, making it possible that divorcement policies could increase welfare; alternatively, these policies may reduce welfare by sacrificing efficiencies. This paper attempts to differentiate between these possibilities by estimating a reduced form equation for the real retail price of unleaded regular gasoline. I find that divorcement regulations raise the price of gasoline by about 2.6% per gallon, reducing consumers' surplus by over $100 million annually. This finding suggests that current proposals to further separate gasoline retailing from refining will be harmful to gasoline consumers. Copyright 2000 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 18 (2000)
    Issue (Month): 3 (November)
    Pages: 217-33

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    Handle: RePEc:kap:regeco:v:18:y:2000:i:3:p:217-33

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    Web page: http://www.springerlink.com/link.asp?id=100298

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    Cited by:
    1. Gius, Mark, 2013. "Regulatory restrictions and energy: The impact of the Jones Act on spot gasoline prices," Energy Policy, Elsevier, vol. 62(C), pages 1058-1063.
    2. William Comanor & Jon Riddle, 2003. "The Costs of Regulation: Branded Open Supply and Uniform Pricing of Gasoline," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(2), pages 135-155.
    3. Ayako Suzuki, 2006. "Vertical Integration in the U.S. Cable Industry," ISER Discussion Paper 0675, Institute of Social and Economic Research, Osaka University.
    4. Jordi Perdiguero, 2011. "Vertical relations and local competition: an empirical approach," IREA Working Papers 201124, University of Barcelona, Research Institute of Applied Economics, revised Dec 2011.
    5. Mitsuru Sunada, 2010. "Vertical Integration in the Japanese Movie Industry," Journal of Industry, Competition and Trade, Springer, vol. 10(2), pages 135-150, June.
    6. Serebrisky, Tomas, 2003. "The role of advocacy in competition policy : the case of the Argentine gasoline market," Policy Research Working Paper Series 3130, The World Bank.
    7. Muehlegger, Erich, 2006. "Gasoline Price Spikes and Regional Gasoline Content Regulation: A Structural Approach," Working Paper Series rwp06-015, Harvard University, John F. Kennedy School of Government.
    8. Christopher Taylor & Jeffrey Fischer, 2003. "A Review of West Coast Gasoline Pricing and the Impact of Regulations," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(2), pages 225-243.
    9. Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure: a policy framework," CPB Document 157, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Zimmerman, Paul R., 2009. "The competitive impact of hypermarket retailers on gasoline prices," MPRA Paper 20248, University Library of Munich, Germany.
    11. James Alm & Edward Sennoga & Mark Skidmore, 2005. "Perfect Competition, Spatial Competition, and Tax Incidence in the Retail Gasoline Market," Working Papers 05-09, UW-Whitewater, Department of Economics.
    12. Cooper, James C. & Froeb, Luke M. & O'Brien, Dan & Vita, Michael G., 2005. "Vertical antitrust policy as a problem of inference," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 639-664, September.
    13. Lafontaine, Francine & Slade, Margaret, 2007. "Vertical Integration and Firm Boundaries : The Evidence," The Warwick Economics Research Paper Series (TWERPS) 799, University of Warwick, Department of Economics.
    14. Deck, Cary A. & Wilson, Bart J., 2008. "Experimental gasoline markets," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 134-149, July.
    15. Suzuki, Ayako, 2009. "Market foreclosure and vertical merger: A case study of the vertical merger between Turner Broadcasting and Time Warner," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 532-543, July.

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