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Vertical Integration in Gasoline Supply: An Empirical Test of Raising Rivals' Costs

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  • Gilbert, Richard
  • Hastings, Justine

Abstract

This paper explores the relationship between the structure of the market for the refining and distribution of gasoline and the wholesale price of unbranded gasoline sold to independent gasoline retailers. Theoretically, the effect of an increase in vertical integration is ambiguous because opposing forces act to increase and decrease wholesale prices. We empirically examine the effects of vertical and horizontal market structures on wholesale prices using both a broad panel and an event analysis. The panel covers twenty-six metropolitan areas from January 1993 through June 1997. The event is a merger of Tosco and Unocal in 1997 that changed the vertical and horizontal structure of thirteen West Coast metropolitan areas. Both data sets show that an increase in the degree of vertical integration is associated with higher wholesale prices.

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Bibliographic Info

Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number qt3b7101mj.

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Date of creation: 01 Jun 2001
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Handle: RePEc:cdl:compol:qt3b7101mj

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Related research

Keywords: vertical integration; oligopoly; market power; gasoline;

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Cited by:
  1. BŸhler, Stefan & Zava Aydemir, 2003. "Estimating Vertical Foreclosure in U.S. Gasoline Supply," Royal Economic Society Annual Conference 2003 33, Royal Economic Society.

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