VERTICAL SEPARATION INCREASES GASOLINE PRICES

Nathan Wilson ()

Economic Inquiry, 2015, vol. 53, issue 2, 1380-1391

Abstract: type="main" xml:id="ecin12203-abs-0001"> I examine the relationship between vertical separation and gasoline stations' prices and sales. The endogeneity of stations' organizational forms is addressed using both panel methods and an instrumental variables strategy. Controlling for the endogeneity of form, I find that vertical separation raises margins by 25%–45% but does not have a statistically significant impact on output. I interpret these results as suggesting that vertical separation induces local agents to exert effort in ways that increase consumers' demand . ( JEL L14, L24, L81)

Date: 2015
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