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Regulatory Restrictions on Vertical Integration and Control: The Competitive Impact of Gasoline Divorcement Policies

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Abstract

Gasoline “divorcement” regulations restrict the integration of gasoline refiners and retailers. Theoretically, vertical integration can harm competition, making it possible that divorcement policies could increase welfare; alternatively, these policies may reduce welfare by sacrificing efficiencies. This paper attempts to differentiate between these possibilities by estimating a reduced form equation for the real retail price of unleaded regular gasoline. I find that divorcement regulations raise the price of gasoline by about 2.6¢ per gallon, reducing consumers' surplus by over $100 million annually. This finding suggests that current proposals to further separate gasoline retailing from refining will be harmful to gasoline consumers.

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Authors and Affiliations

  1. Bureau of Economics, United States Federal Trade Commission, Washington, D.C., 20580

    Michael G. Vita

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  1. Michael G. Vita
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Vita, M.G. Regulatory Restrictions on Vertical Integration and Control: The Competitive Impact of Gasoline Divorcement Policies. Journal of Regulatory Economics 18, 217–233 (2000). https://doi.org/10.1023/A:1008150819999

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