Tuesday, August 5, 2008
Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction
Posted by D. Daniel Sokol
The new issue of the Journal of Law and Economics has an interesting piece on Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction by John Simpson and Christopher Taylor, both of the FTC.
ABSTRACT: In 1999, Marathon Ashland Petroleum (MAP) acquired the Michigan assets of Ultramar Diamond Shamrock (UDS), which increased MAP's share of terminal storage in Michigan from about 16 percent to about 25 percent and increased the share of gasoline stations bearing a MAP brand from about 16 percent to about 24 percent. In this paper, we examine whether this acquisition affected the retail price of gasoline. We use a difference-in-differences model to compare price movements in six Michigan cities affected by the acquisition with price movements in two nearby cities unaffected by the acquisition. Using this model, we find no evidence that this acquisition led to higher prices for consumers.