Open Daily: 10am - 10pm | Alley door pickup 10am - 7pm 3038 Hennepin Ave Minneapolis, MN
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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
The Impact of Vertical Contracting on Firm Behavior: Evidence from Gasoline Stations

The Impact of Vertical Contracting on Firm Behavior: Evidence from Gasoline Stations

Federal Trade Commission

Paperback

Business General

ISBN10: 1502491141
ISBN13: 9781502491145
Publisher: Createspace
Published: Sep 25 2014
Pages: 46
Weight: 0.29
Height: 0.10 Width: 8.50 Depth: 11.02
Language: English
Analyses of organizational form's impact on economic behavior have been rarer than studies of the determinants of organizational form itself. To fill this gap, Federal Trade Commission develops a theoretical model tailored to the retail gasoline industry that endogenizes the choice of both organizational form and price. The model predicts that vertical separation should be associated with higher prices due to both effort-induced shifts in demand and double marginalization. It also demonstrates the confoundedness of contract choice and pricing, but suggests that identification can be achieved by focusing on variation in monitoring costs across organizational forms. Explicitly addressing the endogeneity of contract choice, Federal Trade Commission test the model's predictions using a unique dataset containing information on both the characteristics and behavior of gasoline stations. Consistent with the model's predictions, Federal Trade Commission finds that vertical separation is associated with higher prices even after controlling for the endogeneity of form choice. Moreover, the data suggest that the increase in price is due both to demand shifting and double marginalization.

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