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Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction

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  • John Simpson
  • Christopher Taylor

Abstract

In 1999, Marathon Ashland Petroleum (MAP) acquired the Michigan assets of Ultramar Diamond Shamrock (UDS), which increased MAP's share of terminal storage in Michigan from about 16 percent to about 25 percent and increased the share of gasoline stations bearing a MAP brand from about 16 percent to about 24 percent. In this paper, we examine whether this acquisition affected the retail price of gasoline. We use a difference-in-differences model to compare price movements in six Michigan cities affected by the acquisition with price movements in two nearby cities unaffected by the acquisition. Using this model, we find no evidence that this acquisition led to higher prices for consumers. .

Suggested Citation

  • John Simpson & Christopher Taylor, 2008. "Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction," Journal of Law and Economics, University of Chicago Press, vol. 51(1), pages 135-152, February.
  • Handle: RePEc:ucp:jlawec:v:51:y:2008:i:1:p:135-152
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    References listed on IDEAS

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    1. Chouinard, Hayley & Perloff, Jeffrey M., 2004. "Incidence of federal and state gasoline taxes," Economics Letters, Elsevier, vol. 83(1), pages 55-60, April.
    2. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-569, June.
    3. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
    4. Christopher T. Taylor & Daniel S. Hosken, 2007. "THE ECONOMIC EFFECTS OF THE MARATHON-ASHLAND JOINT VENTURE: THE IMPORTANCE OF INDUSTRY SUPPLY SHOCKS AND VERTICAL MARKET STRUCTURE -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 419-451, September.
    5. Justine S. Hastings & Richard J. Gilbert, 2005. "MARKET POWER, VERTICAL INTEGRATION AND THE WHOLESALE PRICE OF GASOLINE -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 469-492, December.
    6. Schumann, Laurence & Reitzes, James D & Rogers, Robert P, 1997. "In the Matter of Weyerhaeuser Company: The Use of a Hold-Separate Order in a Merger with Horizontal and Vertical Effects," Journal of Regulatory Economics, Springer, vol. 11(3), pages 271-289, May.
    7. Barton, David M & Sherman, Roger, 1984. "The Price and Profit Effects of Horizontal Merger: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 33(2), pages 165-177, December.
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    Cited by:

    1. Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009. "Generating Evidence to Guide Merger Enforcement," CPI Journal, Competition Policy International, vol. 5.
    2. Emilie Dargaud & Carlo Reggiani, 2015. "On The Price Effects Of Horizontal Mergers: A Theoretical Interpretation," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 236-255, July.
    3. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2015. "Price dispersion and station heterogeneity on German retail gasoline markets," DICE Discussion Papers 171, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 554-568.
    5. Justus Haucap & Ulrich Heimeshoff & Manuel Siekmann, 2017. "Fuel Prices and Station Heterogeneity on Retail Gasoline Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    6. Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," Journal of Law and Economics, University of Chicago Press, vol. 57(S3), pages 67-100.
    7. Haucap, Justus & Heimeshoff, Ulrich & Siekmann, Manuel, 2016. "Selling gasoline as a by-product: The impact of market structure on local prices," DICE Discussion Papers 240, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. repec:kap:ejlwec:v:45:y:2018:i:2:d:10.1007_s10657-014-9437-0 is not listed on IDEAS
    9. Tadas Bruzikas & Adriaan R. Soetevent, 2014. "Detailed Data and Changes in Market Structure: The Move to Unmanned Gasoline Service Stations," Tinbergen Institute Discussion Papers 14-123/VII, Tinbergen Institute.
    10. Stephen Martin, 2012. "Market Structure and Market Performance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(2), pages 87-108, March.
    11. Orley C. Ashenfelter & Daniel S. Hosken & Matthew C. Weinberg, 2015. "Efficiencies brewed: pricing and consolidation in the US beer industry," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 328-361, June.
    12. Juan Luis Jiménez & Jordi Perdiguero, 2018. "Mergers and difference-in-difference estimator: Why firms do not increase prices?," European Journal of Law and Economics, Springer, vol. 45(2), pages 285-311, April.
    13. Christopher T. Taylor & Nicholas M. Kreisle & Paul R. Zimmerman, 2010. "Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California: Comment," American Economic Review, American Economic Association, vol. 100(3), pages 1269-1276, June.
    14. 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.
    15. Tenn, Steven & Yun, John M., 2011. "The success of divestitures in merger enforcement: Evidence from the J&J-Pfizer transaction," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 273-282, March.
    16. repec:kap:jincot:v:18:y:2018:i:1:d:10.1007_s10842-017-0249-0 is not listed on IDEAS
    17. Nikolic, Adriana & Weiss, Christoph, 2014. "Spatial interactions in location decisions: Empirical evidence from a Bayesian spatial probit model," Department of Economics Working Paper Series 4245, WU Vienna University of Economics and Business.
    18. Zimmerman, Paul R., 2009. "The competitive impact of hypermarket retailers on gasoline prices," MPRA Paper 20248, University Library of Munich, Germany.
    19. repec:pri:cepsud:183ashenfelter is not listed on IDEAS
    20. Nicholas Kreisle, 2015. "Merger Policy at the Margin: Western Refining’s Acquisition of Giant Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(1), pages 71-89, August.
    21. repec:bla:ausecp:v:56:y:2017:i:3:p:201-218 is not listed on IDEAS

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