The Effects of Different Contractual Arrangements: The Case of Retail Gasoline Markets

Barron, John M.; Umbeck, John

doi:10.1086/467067

Cited by 110 publications

(43 citation statements)

References 8 publications

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“…This is most apt to occur when the agency believes that the vertical structure is exacerbating horizontal market power. The three studies that assess gasoline divorcement directly (Barron and Umbeck (1984), Vita (2000) and Blass and Carlton (2001)) conclude that retail prices and costs were higher and hours were shorter after it occurred. In other words, they are unanimous in concluding that the policy was misguided.…”

mentioning

confidence: 99%

Vertical Integration and Firm Boundaries: The Evidence

Lafontaine

Slade

2007

Journal of Economic Literature

599

323

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4 hypotheses that they test. Our motive for discussing the theories is not to produce a comprehensive survey of their richness but rather to provide us with a framework within which to present the evidence. In particular, the evidence that we present is organized around the predictions of simple bare-bones models.Throughout our presentation we discuss some of the measurement challenges that authors face but mostly ignore econometric problems. We do this to keep the overview tractable and of reasonable length. This is not to say that the econometric problems are unimportant. To make this point clear, in each of the two segments we highlight some of the econometric issues that researchers must confront. Since those issues are not always dealt with satisfactorily, one can be skeptical about some of the conclusions that authors have reached. Nevertheless, taken as a body, the evidence is often so strong that it can overcome much of our skepticism.

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mentioning

confidence: 99%

Vertical Integration and Firm Boundaries: The Evidence

Lafontaine

Slade

2007

Journal of Economic Literature

599

323

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“…Studies as early as Livingston and Levitt (1959) found a distinct difference in gasoline prices depending on the type of retail outlet; larger national outlets associated with specific refineries versus smaller independent local businesses that purchased their gas at the lowest price possible. Marvel (1976) found that higher-priced gas stations (typically branded, in a contractual arrangement with a specific refiner) showed smaller price fluctuation, a distinction continued by the work of Barron and Umbeck (1984), Comonor and Riddle (2003) and a result confirmed by Deck and Wilson (2008). The Federal Trade Commission (2005) confirms that increased competition leads to lower gas prices, but only at a marginal level.…”

Section: 0mentioning

confidence: 99%

Buy here, or keep driving? The effect of geographic market density on retail gas prices

Johnson

Schultheis

Lybecker

et al. 2016

JOB

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“…These studies dealt with retail prices of gasoline in the USA (Barron and Umbeck, 1984;Shepard, 1993), prices charged by retailers of soft-drink bottlers (Muris, Scheffman and Spiller, 1992), beer sold in public houses in the UK (Slade, 1998), and the USA fast-food industry (Graddy, 1995;Lafontaine, 1995). Within car distribution itself, Smith II (1982) estimates a more than nine percent successive monopoly price distortion in states where an exclusive territory has been legislatively expanded by "relevant market area" laws that prevent car manufacturers from freely adding new franchisees in an area with established franchisees.…”

Section: Agents' Free Ridingmentioning

confidence: 99%

Institutional constraints on organizations: the case of Spanish car dealerships

2008

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We explain the choice between franchising and vertical integration by estimating a model of relative performance in a sample of 250 Spanish car distributors, controlling for self-selection and including environmental factors. The method allows us to estimate performance counterfactuals. Organizational choice seemingly aims to contain moral hazard for both distributors and manufacturers but it is subject to start-up constraints and switching costs. While the market for franchises remained underdeveloped, information asymmetries led to the opening of integrated outlets. Their subsequent conversion into franchised outlets probably involved prohibitive transaction costs. Consequently, they performed worse than would have been expected had they been independent, as confirmed by the systematic improvement observed when they were in fact converted. The timing of such conversions suggests that switching costs were prohibitive until firms developed a substantial cushion of temporary contracts, previously forbidden by regulation.

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The Effects of Different Contractual Arrangements: The Case of Retail Gasoline Markets

Cited by 110 publications

References 8 publications

Vertical Integration and Firm Boundaries: The Evidence

Vertical Integration and Firm Boundaries: The Evidence

Buy here, or keep driving? The effect of geographic market density on retail gas prices

Institutional constraints on organizations: the case of Spanish car dealerships

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