In a paper in the March 2004 AER, Justine Hastings concludes that the acquisition of an independent gasoline retailer, Thrifty, by a vertically integrated firm, ARCO, is associated with sizable price increases at competing stations. To better understand the novel mechanism to which she...

The net effect of vertical integration on consumer welfare depends on the magnitude of the price reductions resulting from the elimination of double marginalization at the integrated firm and the price increases resulting from higher input prices charged to un-integrated competitors. In this...