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Article
Market Power, Vertical Integration, and the Wholesale Price of Gasoline
Journal of Industrial Economics (2006)
  • Richard J Gilbert
  • Justine S Hastings
Abstract

This paper empirically examines the relationship between vertical integration and wholesale gasoline prices. We use discrete and differential changes in the extent of vertical integration generated by mergers in West Coast gasoline refining and retailing markets to test for incentives to raise rivals’ costs. Research design allows us to test for a relationship between vertical integration and wholesale prices, controlling for horizontal market structure, cost shocks and trends. We find evidence consistent with the strategic incentive to raise competitors’ input costs and conclude that vertical integration can have a significant impact on wholesale prices.

Keywords
  • vertical integration,
  • raising rivals’ costs,
  • market power
Disciplines
Publication Date
November, 2006
Citation Information
Richard J Gilbert and Justine S Hastings. "Market Power, Vertical Integration, and the Wholesale Price of Gasoline" Journal of Industrial Economics Vol. 53 Iss. 4 (2006)
Available at: http://works.bepress.com/richard_gilbert/10/