*We are grateful to Severin Borenstein, Kenneth Chay, John DiNardo, Gautam Gowrisankaran, Scott Masten, Paul Ruud, Douglas Staiger, Michael Whinston, Sofia B. Villas-Boas, Miguel J. Villas-Boas, and participants in the Department Seminar and Industrial Organization Workshop at the University of California at Berkeley for helpful comments. This research was supported by a grant from the University of California Energy Institute.
MARKET POWER, VERTICAL INTEGRATION AND THE WHOLESALE PRICE OF GASOLINE*
Article first published online: 16 DEC 2005
The Journal of Industrial Economics
Volume 53, Issue 4, pages 469–492, December 2005
How to Cite
HASTINGS, J. S. and GILBERT, R. J. (2005), MARKET POWER, VERTICAL INTEGRATION AND THE WHOLESALE PRICE OF GASOLINE. The Journal of Industrial Economics, 53: 469–492. doi: 10.1111/j.1467-6451.2005.00266.x
- Issue published online: 16 DEC 2005
- Article first published online: 16 DEC 2005
This paper examines empirically 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. The 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. This suggests that vertical integration can have a significant impact on wholesale prices.