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Estimating Vertical Foreclosure in U.S. Gasoline Supply

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  • Zava Aydemir
  • Stefan Buehler

    ()
    (Socioeconomic Institute, University of Zurich)

Abstract

We examine the competitive effects of the vertical integration of gasoline refineries and retailers in the U.S. Adapting the first-order condition approach of static oligopoly games to the analysis of vertically related oligopolies, we develop a novel framework for directly evaluating the strategic foreclosure effect and the effciency benefits associated with vertical integration. Applying this framework, we find significant evidence for both vertical foreclosure and effciency benefits. The foreclosure effect dominates the effciency benefits for more than half of the refining firms in the sample. Vertical foreclosure is found to increase the wholesale price of refined gasoline by 0.2 to 0.6 cents per gallon.

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File URL: http://www.soi.uzh.ch/research/wp/2002/wp0212.pdf
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Bibliographic Info

Paper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 0212.

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Length: 38 pages
Date of creation: Nov 2002
Date of revision:
Handle: RePEc:soz:wpaper:0212

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Keywords: vertical integration; separation; foreclosure; market conduct; petroleum industry;

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References

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Citations

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Cited by:
  1. Andreas Polk & Armin Schmutzler, 2003. "Lobbying against Environmental Regulation vs. Lobbying for Loopholes," SOI - Working Papers 0301, Socioeconomic Institute - University of Zurich.
  2. repec:ind:iispdp:11-02 is not listed on IDEAS
  3. Hans Gersbach & Armin Schmutzler, 2004. "Globalization and General Worker Training," SOI - Working Papers 0403, Socioeconomic Institute - University of Zurich.
  4. Michael Breuer, 2003. "Multiple Losses, Ex-Ante Moral Hazard, and the Non-Optimality of the Standard Insurance Contract," SOI - Working Papers 0302, Socioeconomic Institute - University of Zurich, revised Apr 2003.
  5. Michael Breuer, 2004. "Deductible or Co-Insurance: Which is the Better Insurance Contract under Adverse Selection?," SOI - Working Papers 0401, Socioeconomic Institute - University of Zurich, revised Oct 2004.
  6. Buehler, Stefan & Haucap, Justus, 2003. "Mobile Number Portability," Working Paper 17/2003, Helmut Schmidt University, Hamburg.
  7. Stefan Boes & Rainer Winkelmann, 2005. "Ordered Response Models," SOI - Working Papers 0507, Socioeconomic Institute - University of Zurich.
  8. Harry Telser & Peter Zweifel, 2003. "Validity of Discrete-Choice Experiments - Evidence for Health Risk Reduction," SOI - Working Papers 0313, Socioeconomic Institute - University of Zurich, revised Feb 2005.
  9. Simon Loertscher & Yves Schneider, 2005. "Switching Costs, Firm Size, and Market Structure," Diskussionsschriften dp0515, Universitaet Bern, Departement Volkswirtschaft.
  10. Haucap, Justus & Buehler, Stefan, 2003. "Strategic Outsourcing Revisited," Working Paper 15/2003, Helmut Schmidt University, Hamburg.
  11. Peter Zweifel & Harry Telser & Stephan Vaterlaus, 2005. "Consumer Resistance Against Regulation: The Case of Health Care," SOI - Working Papers 0505, Socioeconomic Institute - University of Zurich.
  12. Buehler Stefan & Schmutzler Armin, 2005. "Asymmetric Vertical Integration," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-27, January.
  13. Michael Breuer, 2004. "Optimal Insurance Contracts without the Non-Negativity Constraint on Indemnities Revisited," SOI - Working Papers 0406, Socioeconomic Institute - University of Zurich.
  14. Stefan Buehler & Armin Schmutzler, 2005. "On The Role of Access Charges Under Network Competition," SOI - Working Papers 0501, Socioeconomic Institute - University of Zurich.
  15. Bühler, Stefan & Schmutzler, Armin, 2003. "Who Integrates?," CEPR Discussion Papers 4066, C.E.P.R. Discussion Papers.
  16. Harry Telser & Karolin Becker & Peter Zweifel, 2004. "Validity and Reliability of Willingness-to-Pay Estimates: Evidence from Two Overlapping Discrete-Choice Experiments," SOI - Working Papers 0412, Socioeconomic Institute - University of Zurich, revised Mar 2008.

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