Estimating Vertical Foreclosure in U.S. Gasoline Supply

Zava Aydemir and Stefan Buehler

No 212, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: We examine the competitive effects of the vertical integration of gasoline refineries and retailers in the U.S. Adapting the first-order condition approach of static oligopoly games to the analysis of vertically related oligopolies, we develop a novel framework for directly evaluating the strategic foreclosure effect and the effciency benefits associated with vertical integration. Applying this framework, we find significant evidence for both vertical foreclosure and effciency benefits. The foreclosure effect dominates the effciency benefits for more than half of the refining firms in the sample. Vertical foreclosure is found to increase the wholesale price of refined gasoline by 0.2 to 0.6 cents per gallon.

Keywords: vertical integration; separation; foreclosure; market conduct; petroleum industry (search for similar items in EconPapers)
JEL-codes: L13 L22 L49 L71 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2002-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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https://www.zora.uzh.ch/id/eprint/52170/1/wp0212.pdf First version, 2002 (application/pdf)

Related works:
Working Paper: Estimating Vertical Foreclosure in U.S. Gasoline Supply (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0212

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