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Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing

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  • Andrea Shepard
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    Abstract

    Predictions from a principal-agent analysis of the manufacturer-retailer relationship are tested using microdata on contractual form, retail outlet characteristics, and retail prices for gasoline stations in eastern Massachusetts. The empirical results are consistent with upstream firms choosing contracts with strong incentives but less direct control when outlet characteristics make unobservable effort by downstream agents important. Manufacturers trade off incentive power for more direct control when observable effort is relatively more important. There is some evidence that the retail prices of some gasoline products are lower when the upstream firm is allowed to control the retail price directly.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 24 (1993)
    Issue (Month): 1 (Spring)
    Pages: 58-77

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    Handle: RePEc:rje:randje:v:24:y:1993:i:spring:p:58-77

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    Cited by:
    1. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    2. Arturs Kalnins & Francine Lafontaine, 1996. "The Characteristics of Multi-Unit Ownership in Franchising: Evidence from Fast-Food Restaurants in Texas," NBER Working Papers 5859, National Bureau of Economic Research, Inc.
    3. 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.
    4. Timothy F. Bresnahan & Jonathan D. Levin, 2012. "Vertical Integration and Market Structure," NBER Working Papers 17889, National Bureau of Economic Research, Inc.
    5. George P. Baker & Thomas N. Hubbard, 2000. "Contractibility and Asset Ownership: On-Board Computers and Governance in U.S. Trucking," NBER Working Papers 7634, National Bureau of Economic Research, Inc.
    6. Dahlstrom, Robert & Haugland, Sven A. & Nygaard, Arne & Rokkan, Aksel I., 2009. "Governance structures in the hotel industry," Journal of Business Research, Elsevier, vol. 62(8), pages 841-847, August.
    7. Manuszak, Mark D., 2010. "Predicting the impact of upstream mergers on downstream markets with an application to the retail gasoline industry," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 99-111, January.
    8. Hastings, Justine, 2000. "Vertical Relationships and Competition in Retail Gasoline Markets: An Empirical Evidence from Contract Changes in Southern California," Competition Policy Center, Working Paper Series qt0bw767hm, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    9. David Martimort & Salvatore Piccolo, 2010. "The Strategic Value of Quantity Forcing Contracts," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 204-29, February.
    10. Christopher T. Conlon & Julie Holland Mortimer, 2013. "Efficiency and Foreclosure Effects of All-Units Discounts: Empirical Evidence," NBER Working Papers 19709, National Bureau of Economic Research, Inc.
    11. Bai, Chong-En & Xu, Lixin Colin, 2005. "Incentives for CEOs with multitasks: Evidence from Chinese state-owned enterprises," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 517-539, September.
    12. Pierre Azoulay, 2004. "Capturing Knowledge within and across Firm Boundaries: Evidence from Clinical Development," American Economic Review, American Economic Association, vol. 94(5), pages 1591-1612, December.
    13. Ginger Zhe Jin & Phillip Leslie, 2009. "Reputational Incentives for Restaurant Hygiene," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 237-67, February.
    14. U, Peter Lee, 2000. "Competition Policy in the Philippine Downstream Oil Industry," Discussion Papers PASCN DP 2000-14, Philippine Institute for Development Studies.
    15. Pierre Azoulay, 2003. "Acquiring Knowledge Within and Across Firm Boundaries: Evidence from Clinical Development," NBER Working Papers 10083, National Bureau of Economic Research, Inc.
    16. Garen, John, 1998. "Self-employment, pay systems, and the theory of the firm: An empirical analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 36(2), pages 257-274, August.
    17. Dudian Monica & Trasca Daniela & Mitrache Andreea & Georgescu Adriana & Georgescu Adriana, 2008. "The Boundaries Of The Firm. The Case Of Oil Industry In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), pages 112-117, May.
    18. 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.

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