Strategic Motives for Vertical Separation: Evidence from Retail Gasoline Markets

Journal of Law, Economics, and Organization, Vol. 14, No. 1, Spring 1998

Posted: 11 Feb 1998

See all articles by Margaret E. Slade

Margaret E. Slade

University of Warwick - Department of Economics

Abstract

Manufacturers can choose to remain separate from their retailers for both incentive and strategic reasons. In this paper, strategic motives for vertical separation are examined empirically. Two data sets are used for the assessment. The first is a cross section of all contracts between private, integrated oil companies and their branded-service stations in the city of Vancouver, whereas the second is a panel of price and sales data for a subset of the firms in this market. I find that operators of stations that could potentially realize an improvement in price/cost margin due to separation are more likely to be given the authority to set retail prices.

JEL Classification: L13, L14, L22, L6

Suggested Citation

Slade, Margaret E., Strategic Motives for Vertical Separation: Evidence from Retail Gasoline Markets. Journal of Law, Economics, and Organization, Vol. 14, No. 1, Spring 1998, Available at SSRN: https://ssrn.com/abstract=48231

Margaret E. Slade (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

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