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Effectiveness of Merger Remedies: Evidence from the Retail Gasoline Industry
Author(s) -
Lagos Vicente
Publication year - 2018
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12188
Subject(s) - divestment , business , industrial organization , radius , gasoline , hillock , economics , finance , geography , engineering , waste management , computer security , cartography , computer science
This article assesses the effectiveness of outlet divestitures as remedies in a merger between two large gasoline retailers. Results show that divestitures are effective in disciplining the increase in margins generated by the merger, but only for competing gas stations located within a one kilometer radius and only in municipalities with a low density of stations impacted by the merger. Interestingly, this density indicator is a good predictor of both the anticompetitive effect of the merger and the effectiveness of divestitures. Finally, prices of one merging party decreased in locations unaffected by higher concentration, evidencing the presence of efficiency gains.