THE ECONOMIC EFFECTS OF THE MARATHON‐ASHLAND JOINT VENTURE: THE IMPORTANCE OF INDUSTRY SUPPLY SHOCKS AND VERTICAL MARKET STRUCTURE*

Christopher T. Taylor and Daniel S. Hosken

Journal of Industrial Economics, 2007, vol. 55, issue 3, 419-451

Abstract: This study measures the effects of the Marathon/Ashland Petroleum (MAP) joint venture on rack and retail reformulated (RFG) gasoline prices in the four cities where both firms sold RFG before the joint venture. MAP was an early transaction in the recent era of petroleum mergers and resulted in large regional increases in concentration. While wholesale (rack) prices increased in the two cities experiencing the largest change in market structure in the year following the transaction, retail prices did not increase. Our results also highlight the importance of identifying the marginal source of supply in correctly identifying merger effects.

Date: 2007
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