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Vertical relations and local competition : an empirical approach

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The analysis of vertical industry relations forms an essential element in the field of industrial organization. This paper tests hypotheses derived from transaction cost theory and the principal-agent problem in Chile’s petrol market. It shows that local competition plays an important role in the choice of a disintegrated vertical structure, and that low levels of service investment have the same effect. Conversely, the number of own-brand outlets and a high level of investment in services reduce the probability of disintegration. The paper demonstrates that vertical disintegration has a null effect on wholesale petrol prices and a positive effect on retail petrol prices of between 1.6 and 7 per cent, depending on fuel type.

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Universitat de Barcelona. Institut de Recerca en Economia Aplicada Regional i Pública

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Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

# metadata.dc.title[].value
Vertical relations and local competition : an empirical approach