6359. Authors are listed in alphabetical order. We thank Yuanfang Lin for setting up the data in usable form for our empirical analyses. We thank Prof. Glenn MacDonald and Prof. Mark Daskin for their valuable guidance and comments during the preliminary stages of this project. We appreciate the many insightful comments by

This study examines how much, if any, of the differences in retail gasoline prices between markets is attributable to differences in the composition of vertical contract types at gasoline stations in each market. The purchase of the independent retail gasoline chain, Thrifty, by ARCO provides a unique opportunity to examine the effects of changes in different vertical contract types on local retail prices. This event caused sharp changes in the market share of i) fully vertically integrated stations, and ii) independent stations; differentially affecting local markets in the Los Angeles and San Diego Metropolitan areas. Using unique and detailed station-level data, this study examines how these sharp changes affected local retail prices. The detailed data and the research design based on the Thrifty station conversions allow for credible estimation of the effects of the market share of independent retailers and vertically integrated retailers on local market prices, controlling for any omitted factors at the station level, and the city level over time. Results indicate that a decrease in the market share of independent stations has a significant positive impact on local retail price. However, a change in the market share of refiner owned and operated branded stations does not have a significant impact on local market price. These results have important implications as policy makers consider the regulation of vertical contracts as a means to increase competition in gasoline markets. The research design and detailed data also allow for inference on the underlying nature of retail gasoline competition.

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In recent years, a number of mergers have occurred in the petroleum industry involving upstream firms that are imperfectly integrated into retail markets. In order to empirically evaluate the competitive effects of such mergers, this paper proposes a structural model of supply and demand that reflects divisions between upstream producers and downstream retailers. Neither downstream costs including wholesale prices nor upstream costs are observed. A standard differentiated products oligopoly model of retail competition provides an expression for downstream costs including wholesale prices as the difference between observed prices and downstream mark-ups. The downstream model is combined with a model of upstream competition that relates wholesale prices and upstream costs to upstream mark-ups. The supply model is estimated along with a demand model reflecting downstream product differentiation using data from the Hawaiian islands in the early 1990s.

This paper examines the effect of competition on second degree price discrimination in display advertising in Yellow Page directories. Our main empirical finding is that while competition is associated with lower prices, the association is not proportional along the range of product offerings. Instead, directories that face more competitors offer price schedules that display a greater degree of curvature than directories facing less competition. This means that purcahsers of the largest ads pay less per ad size relative to purchasers of small ads for ads in more competitive directories.

There is no widely accepted definition of price discrimination with differentiated products. Either absolute price-cost differences or percentage price-cost markups are used as benchmarks for comparison. I show that the two criteria are qualitatively different: one may indicate price discrimination when the other does not. Moreover, anything other than marginal cost pricing will be identified as price discrimination by at least one of the two. I propose choosing a criterion based on the cost of arbitrage in the market under examination. Because this is often difficult to determine, I also recommend always reporting results with both measures.

This paper examines dynamic pricing behavior in retail gasoline markets for 19 Canadian cities over 574 weeks. I find three distinct retail pricing patterns: 1. standard cost-based pricing, 2. sticky pricing, and 3. steep, asymmetric retail price cycles that, while seldom documented empirically, resemble those of Maskin & Tirole [1988]. I use a Markov switching regression to estimate the prevalence of the regimes, the pattern of markup in each, and the structural characteristics of the price cycles themselves. Retail price cycles prevail in over 40 % of the sample. I show they are more prevalent in markets and at times where there is a greater penetration of small, independent firms. The cycle is accelerated and amplified in markets with very many small firms. In markets with few small firms, sticky pricing is dominant. Each of these findings is consistent with the theory of Edgeworth Cycles. I discuss both welfare and policy implications of such pricing behavior, and compare the Canadian

This paper examines the relationship between changes in telecommunications provider competition on international long distance routes and changes in prices on those routes. Overall, increased competition is associated with significantly lower prices to consumers of long distance services. However, the relationship between competition and price varies according to the type of long distance plan considered. For the international flagship plans frequently selected by more priceconscious consumers of international long distance, increased competition on a route is associated with lower prices. In contrast, for the basic international plans that are the default selection for consumers, increased competition on a route is actually associated with higher prices. Thus, somewhat surprisingly, price dispersion appears to increase as competition increases.

This paper empirically examines the relationship between vertical integration and wholesale gasoline prices. We use discrete and differential changes in the extent of vertical integration generated by mergers in West Coast gasoline refining and retailing markets to test for incentives to raise rivals ’ costs. Research design allows us to test for a relationship between vertical integration and wholesale prices, controlling for horizontal market structure, cost shocks and trends. We find evidence consistent with the strategic incentive to raise competitors ’ input costs and conclude that vertical integration can have a significant impact on wholesale prices.

The "raising rivals' costs" literature predicts that vertically integrated firms have an incentive to generate profits in downstream markets by increasing wholesale prices to competing retailers. We test this theory using data on wholesale gasoline prices. The 1997 acquisition of Unocal's West Coast refining and marketing assets by Tosco Corporation generated discrete and differential changes in the extent of Tosco's vertical integration into thirteen West Coast metropolitan areas. This event permits identification of the price effects of vertical integration, controlling for the effects of horizontal market structure, cost shocks and trends, and potentially confounding city-specific covariates. We find