Vertical relations and local competition: an empirical approach

Jordi Perdiguero

No 201124, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: The analysis of vertical industry relations forms an essential element in the field of industrial organization. This paper tests hypotheses derived from transaction cost theory and the principal-agent problem in Chile’s petrol market. It shows that local competition plays an important role in the choice of a “disintegrated” vertical structure, and that low levels of service investment have the same effect. Conversely, the number of own-brand outlets and a high level of investment in services reduce the probability of disintegration. The paper demonstrates that vertical disintegration has a null effect on wholesale petrol prices and a positive effect on retail petrol prices of between 1.6 and 7 per cent, depending on fuel type.

Keywords: Vertical structure; local competition; petrol market; services and prices JEL classification:L11; L22; L42 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-12, Revised 2011-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:201124

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