Will open supply lower retail gasoline prices?
When a lessee-dealer enters into a contract to lease a retail gasoline station from a refiner, the dealer simultaneously agrees to purchase all gasoline supplies from the same refiner. (1) One of the most interesting characteristics of these lease agreements is that although the lease price of the station and equipment is clearly specified in the lease contract, the wholesale price of gasoline is not specified anywhere in the supply contract. In other words, the lessee-dealer agrees to purchase gasoline at whatever price the refiner chooses to charge. (2) By contract, the lessee-dealer cannot shop around for the lowest price. The wholesale price charged to the lessee-dealer is usually called the dealer tank wagon (DTW) price, which reflects the fact that the gasoline is delivered by the refiner to the retail station via tanker truck.
Most (but not all) U.S. refiners also market gasoline through independent wholesale distributors, called jobbers. These jobbers often own their own tanker trucks and can shop around for the lowest price among the various refiners. Jobbers then purchase the gasoline at their chosen refiner's truck rack and then deliver and resell the gasoline to retailers who have contracted with the jobber for delivered gasoline. The price the jobber pays the refiner for the gasoline is called the rack price. On any given day, this rack price is usually lower than the DTW price charged to lessee-dealers. (3)
For years, lessee-dealers have complained about the practice of refiners selling to jobbers at rack prices lower than DTW prices. According to Bill Ligon, executive director of the Texas Service Station Association in 1986:
What we are upset about ... is that the major oil companies are raping the consumer by about 15-20 cents per gallon in the difference between dealer tank wagon [price] and the unbranded rack [price]. If [lessee-]dealers got the same break as the [open-dealers] and the jobbers, they'd pass on to the consumers all the cost cuts they could manage. (emphasis added) (4)
Since this complaint made 17 years ago, lessee-dealers have been working through the legislative process and through litigation to obtain the right to open supply, a provision that would allow any lessee-dealer to have the option to stop buying its gasoline from its contracted refiner and to begin purchasing gasoline from any other source.
In 1997, California Senate Bill 404 proposed to give lessee-dealers the right to open supply. (5) This bill passed in the Senate but failed to come to a vote in the State Assembly. Frustrated lessee-dealers tried again with similar bills in California in 1999 and 2000, but without success. Lessee-dealers in Arizona introduced an open-supply bill in 2000, but that bill never made it out of committee. In 2001, open-supply bills were introduced in state legislatures in Oregon, Minnesota, Michigan, and Connecticut. Once again, all met with failure. Given the national attention paid to open-supply legislation and its debated effects on retail gasoline prices, the U.S. Federal Trade Commission (FTC) held sessions on open supply in 2002. (6)
Turning attention to the courts, open-supply proponents have filed a number of lawsuits. For example, in the recent cases of HRN, Inc. et al. v. Shell Oil Company et al.; Kristine Becher et al. v. Shell Oil Company et al.; Coast Village, Inc. et al. v. Equilon Enterprises LLC; and Plainview Gulf, Inc. v. Cumberland Farms, Inc. (Gulf Division), plaintiffs have each made claims of unfair competition with same-brand jobbers who are able to purchase gasoline at the lower rack price. The open-supply plaintiffs lost in summary judgment in HRN (2001), settled in Becher (2000), and refilled under a different name in Coast Village (2002); the Plainview Gulf case has yet to go to court. (7) Thus, the courts have yet to provide any ruling in support of open supply. Whether in the courts or the legislatures, open supply continues to be a hotly debated topic in the retail gasoline industry.
The purpose of this article is to empirically test the passing on claims of lessee-dealers. In all of the legislative hearings and in the courts, open-supply proponents have claimed, either explicitly or implicitly, that if lessee-dealers were granted the right to open supply, they would pass on any savings to the consumer through lower retail prices. Using market data obtained from Whitney-Leigh, a retail gasoline survey company, the authors analyze a four-year price history of more than 700 gasoline stations located in the Los Angeles Basin area. Important for this study, included in this data set is information concerning the supplier for each station, that is, whether the station is supplied by its refiner (commonly called direct supply) or an independent jobber (jobber supply). This data set of prices was then combined with other Whitney-Leigh data that contain the addresses and other station-level characteristics of every retail station in the Los Angeles Basin area. Using station addresses, the authors plotted each station's longitude and latitude, allowing the authors to map precisely its location relative to all other stations. By controlling for location and other station- and market-level features, the authors are then able to isolate the effect of direct supply on retail prices. Using a variety of estimation techniques, jobber-supplied stations are found to not charge lower retail prices compared to stations that are directly supplied by refiners. In fact, jobber-supplied stations are characterized by significantly higher retail prices compared with stations directly supplied by refiners, other things equal. This article argues that this casts serious doubt on the claims made by open-supply proponents.
The outline of this article is as follows. Section II describes the structure of the retail gasoline market in the United States and explains the open-supply debate in greater detail. Section III describes empirical methodology and data, and empirical results follow in section IV. Finally, a discussion of the results and their possible implications in the open-supply debate is provided in section V.
II. THE STRUCTURE OF THE U.S. GASOLINE MARKET AND THE ISSUE OF OPEN SUPPLY
A. Direct Supply
Most of the gasoline in the United States is marketed at the retail level through stations operated by lessee-dealers. As mentioned previously, these lessee-dealers typically enter into two contractual agreements with petroleum refiners. First, they agree to lease the station and other equipment from the refiner, and second, lessee-dealers agree to purchase all of their gasoline supplies directly from the refiner whose brand name appears on the station (see note 1). The gasoline is then marketed under then brand name of the refiner. The lessee-dealer then determines the retail price of the gasoline that consumers purchase and is the residual claimant on any subsequent profit.
Refiners also market branded gasoline through a variety of other channels. For example, instead of leasing the station to a dealer, refiners can vertically integrate into the retail market. Like lessee-dealer stations, these company-operated stations obtain their gasoline directly from the refiner who operates the station. Unlike lessee-dealers, however, the retail price of gasoline at these stations will be determined by the refiner itself.
Refiners also sell gasoline to individuals who own their own stations. These open-dealers have the right to purchase gasoline from any wholesaler selling in the area. Some of these open-dealers will shop around each day for the lowest price, buy wholesale on the spot market, and then sell the gasoline to the consumer without a major brand name. However, most of these open-dealers, like lessee-dealers, enter into supply contracts with one refiner and agree to purchase all gasoline from the refiner and retail it under the supplying refiner's brand name. These stations are then supplied with gasoline delivered directly to the station by the refiner.
Importantly, company-operated stations, lessee-dealer stations, and most open-dealer stations have one thing in common: each is typically supplied gasoline directly by the refiner who delivers the gasoline to the station.
B. Supply from Other Sources
Refiners also sell gasoline, branded and unbranded, at truck racks to jobbers (distributors) who own their own tanker trucks. (8) These jobbers purchase their gasoline at the appropriate rack price, load it into their trucks, and resell it through a variety of station types. For example, the jobber may own and salary-operate his or her own stations, just like refiners. Like refiners, the jobber may own and lease stations to its own lessee-dealers. Finally, similar to the refiners, the jobber may sell the gasoline to open-dealers. As mentioned previously, although the majority of open-dealers contract with a supplier, a small number will purchase gasoline supplies through these independent distributors.
C. Open Supply
Lessee-dealers who pay the higher DTW price have long argued that they are at a competitive disadvantage because of their inability to purchase gasoline from jobbers who purchase it from the refiners at the lower rack price. Arguments against this exclusion have included claims of illegal price discrimination, predatory pricing, and unfair competition. As reviewed previously, lessee-dealers and their trade associations have sued refiners under state unfair practice laws and federal antitrust laws. In addition, lessee-dealers have lobbied at the state and federal level for legislation that would allow them to purchase their gasoline supplies from jobbers, rather than paying the higher DTW price. (9) This litigation and proposed legislation is aimed at giving lessee-dealers open supply, that is, the right to purchase gasoline from any wholesaler, not just the particular refiner with whom the lessee-dealer has contracted. (10)
In virtually all of the lessee-dealers' lobbying efforts, whether through litigation or legislation, there has been one claim that consistently appears: If lessee-dealers have the right to purchase gasoline from any wholesaler at the lowest price possible, then lessee-dealers will pass these savings on to the consumers through lower retail prices.
This passing on argument is also implicit in the antitrust and unfair competition litigation. The basis for antitrust law is the protection of consumers. For the relatively low rack price offered to jobbers to have a detrimental impact on consumers, the retail prices at lessee-dealer stations must be higher than they would otherwise be if given the right to purchase wholesale from jobbers. Unfair competition laws, on the other hand, though ultimately based on the protection of the consumer, are often aimed at protecting businesses. For lessee-dealers to be harmed by relatively low rack prices, the stations buying from the jobbers must be charging lower retail prices and bidding customers away from the lessee-dealers while at the same time presumably earning larger profits.
Lessee-dealers and their associations have argued that open supply will lead to lower retail prices, but the arguments against open supply are numerous, complex, and often subtle. They range from issues of quality control and free-rider problems for the refiner to complex contractual issues that arise because the gasoline supply contract is only a part of the total franchise package offered by refiners. (11)
Although these issues are important, there remains one fundamental question: will lessee-dealers with the right to purchase from jobbers have lower retail prices than lessee-dealers without that right? There are several reasons to believe that open supply may not reduce retail prices charged by lessee-dealers. First, the authors observe open-dealers, who already have the right to purchase gasoline from whomever they wish, entering into supply contracts with refiners to deliver their gasoline at the DTW price. Open-dealers would presumably not do this if jobbers offered a better price.
Second, no wholesale shift is observed from direct-supplied stations to jobber-supplied stations over time. Table 1 reports the proportion of stations in the Los Angeles Basin area that are direct-supplied by refiners for the years 1992-96. One might expect a substantial decrease in the number of direct-supplied stations over time if jobber-supplied stations are able to sell gasoline profitably at lower prices compared to lessee-dealers. Table 1 reports a slight decline, approximately 5 percentage points, in the number of direct-supplied stations, but this decline is not as large as one might expect if jobber-supplied stations were receiving significant discounts from the DTW price.
Finally, as mentioned previously, the lessee-dealer's supply agreement is only part of a larger contractual package. The package also includes a contract to lease the land, the equipment, the brand name, signage, and less tangible items like liability, promotional sharing, and so on. For many oil companies, these contracts are not easily separated. For example, some oil companies have chosen to charge their lessee-dealers a monthly station rent that is significantly lower than their full economic cost of ownership and maintenance. These oil companies often charge their lessee-dealers a relatively higher DTW price for the gasoline. This arrangement has the advantage of sharing the risk from unexpected variations in the local demand for gasoline facing each dealer. Clearly, allowing lessee-dealers to purchase gasoline from other suppliers will involve changes in the terms of the station rent contract which, in turn, may impact the lessee-dealer's marginal cost of selling gasoline, and thereby offset any reduction in the wholesale price of gasoline.
Fortunately, refiners in the Los Angeles area have chosen to market their gasoline through each of the distribution channels described, both direct- and jobber-supplied. With the current unique data set, which will be described in more detail in the next section, the authors' can isolate and measure the effect of the source of supply on the retail price of gasoline. If the lessee-dealers' claims are correct, jobber-supplied stations should have lower retail prices than direct-supplied stations, other things equal.
D. Related Literature
To the authors' knowledge, only one academic study has examined the issue of open supply in the retail gasoline industry. Comanor and Riddle (2002) do not examine retail prices per se, but rather focus on the likely impact of open-supply legislation on prices at the whole-sale terminal rack. In their analysis, Comanor and Riddle consider how the major oil companies might react to mandated open supply and how such reactions would affect the prices that drivers in California would face if bills like California Senate Bill 404 were to pass. Institutionally, Comanor and Riddle posit that refiners would respond to the proposals by creating a wholesale price that does not now exist, called a dealer rack price. Such a move, they hypothesize, would shift price determination from local pricing zones to broader geographic areas, resulting in less price variability across refiners. Results from their simulations indicate that although some stations would pay lower delivered prices for gasoline, most would pay higher prices under open supply, with an average increase for branded gasoline of approximately 2 cents per gallon throughout California. Comanor and Riddle conclude that "the impact of branded open supply proposals such as SB 404 is likely to be the opposite of that envisioned by their proponents" (p. 31). (12)
III. EMPIRICAL FRAMEWORK
The goal of the empirical analysis is to test the veracity of the claims made by the proponents of open supply, primarily those of lessee-dealers who argue that their retail prices will fall if they are given the right to purchase their wholesale supplies from independent wholesalers (jobbers) rather than being held to their contracts to purchase gasoline directly from their refiners at the higher DTW price. Controlling for station- and market-level characteristics, if prices charged at stations that are supplied directly from the refiners are consistently higher, on average, than the prices charged at stations with a broader range of supply options, then the authors could reach a reasonable conclusion that the passage of open-supply legislation would significantly lower prices paid by consumers. If, on the other hand, there is no difference in the prices charged at direct-supplied stations and jobber-supplied stations or if jobber-supplied stations have relatively higher prices, other things equal, then the validity of the primary argument for open supply will be called into question.
This article employs two data sets, obtained from Whitney-Leigh, that when combined provide the necessary data to test the claims of open-supply supporters. The first is a series of census surveys that contain detailed station characteristics on purportedly all of the more than 4,000 gasoline stations in the five-county region known as the Los Angeles Basin (Los Angeles, Orange, Ventura, San Bernardino, and Riverside Counties) for the years 1992-95. The data contained in the census surveys report station-level characteristics, such as street address, city, county, ZIP code, brand affiliation, and whether gasoline is supplied to the station directly by the refiner or through a jobber.
The second data set is a series of bimonthly surveys of prices for a subset of stations in the Los Angeles Basin area for the years 1992-95. (13) These price surveys provide detailed information on cash-only prices and volume sold for each station, identifying price and gallons sold by grade of gasoline (regular and premium unleaded) and by type of service (full- or self-service). Each price survey collects data on more than 700 stations in the Los Angeles area. These price surveys have been matched with the Los Angeles census surveys to yield a comprehensive data set.
Finally, station addresses were used to plot station locations, and these locations were converted into latitude and longitude coordinates (U.S. Census Bureau's Land View II GIS software). These coordinates are used to draw market areas around each station and calculate distances between stations. The authors discuss the role of the market's spatial features in more detail later. Although the sample of Los Angeles stations for which prices are available is likely not a random sample from the census surveys, it does conform to the characteristics of the population of interest and can be considered a representative sample. Table 2 presents descriptive statistics from both the census surveys and the price surveys.
There are determinants of the retail price of gasoline other than the source (cost) of a station's supply of gasoline. (14) Other independent variables that may have an effect on price are each station's brand affiliation, county-level fixed effects that may capture differences in zoning and/or population density, and survey date dummy variables that control for the date of the price surveys. Additionally, to capture the impact of market structure on price for each station in our sample, we control for the number of competitors within a half-, one-, or two-mile radius of each station, and the distance to each station's closest competitor. (15) Results were qualitatively unchanged when the market radius definition was varied, so only those specifications that include the one-mile radius definition are reported. The authors proxy other station-level costs with variables that indicate whether a station has a car wash or a convenience store and whether the station offers repair services or full service. To control for station age, a variable is included that indicates if the station has pay-at-the-pump technology that allows customers to pay with a credit card at the pump. The presumption is that newer or recently remodeled stations are more likely to offer this service. (16) Finally, the authors considered controlling for each station's capacity (i.e., number of fueling positions, number of gasoline nozzles, etc.). Given that such a capacity measure is arguably endogenously determined with the station price, and given that inclusion of such measures did not qualitatively impact our results, the authors elected to exclude the capacity measure in the estimations and results reported below.
The analysis examines the effect of supply source and other station- and market-level variables on four different prices: (1) self-service regular unleaded, (2) self-service premium unleaded, (3) a volume-weighted average of all self-service prices, and (4) a volume-weighted average of all prices, including full service. Prices are measured in cents per gallon and were deflated to 1991 values using the Los Angeles Consumer Price Index.
The data consist of a panel of stations from 1992-95. The average number of observations on an individual station is approximately 4.6 observations per year. Given that the data contain a history of prices and station-and market-level characteristics for each station, there are several empirical questions that can be asked. First, across all stations and all price surveys (i.e., the pooled sample), do direct-supplied stations offer higher or lower prices for gasoline than jobber-supplied stations, holding other station- and market-level characteristics constant? Second, if only those stations that switch from direct- to jobber-supplied or vice versa are examined, what happens to subsequent prices? Finally, if the authors average prices across time for each station, are there significant, purely cross-sectional differences in prices between stations that receive their supply of gasoline via the refiner and those stations that contract with jobbers for gasoline supplies? Each of these questions will be answered using different specifications of the error term in the model to be described.
Given the longitudinal nature of the data and the likelihood of within-station correlation of the error term, the price of gasoline (p) at station i at time t is modeled as
(1a) [P.sub.it] = [[alpha].sub.0] + [[alpha].sub.1] DIREC[T.sub.it] + X[delta] + [e.sub.it],
where DIRECT is a dummy variable equal to unity if station i is direct-supplied from the refiner at time t, X is a matrix of station- and market-level characteristics associated with station i at time t, and e is an error term assumed to have the following form:
(1b) [e.sub.it] = [v.sub.i] + [[epsilon].sub.it].
The error components in (1b) allow for a station-specific error, [v.sub.i], and an error term, [[epsilon].sub.it], assumed to have zero mean, constant variance, and to be uncorrelated with itself.
The questions posed earlier concerning the differences in prices at direct- and jobber-supplied stations can now be answered by varying the estimator used in (1). Using ordinary least squares (OLS), one can use the entire (pooled) panel of data to estimate the observed difference in prices across both types of stations (direct- and jobber-supplied), other things equal. To accomplish this, the authors employ the Huber-White "sandwich" estimator to account for the potential nonindependence of errors at station i across time. (17) Alternatively, a fixed-effects ("within") estimator can be used to identify the differences in price after a station switches from jobber- to direct-supplied and vice versa. (18) Because the fixed-effects estimation is a within-station estimator, it captures the effect of a within-station change in the independent variables. Thus, sufficient change at the station level is needed. Table 3 details the station-level changes observed in the data that are important to the fixed-effects estimation. Finally, a between-effects estimator can be used to assess differences in price in a purely cross-sectional context across stations obtaining their gasoline supplies from refiners or jobbers. (19) In each of the three specifications, the authors calculate standard errors that are robust to heteroskedasticity.
The (unconditional) average price of self-service regular unleaded gasoline for each year in the sample is reported in Table 4, where major and nonmajor brands are delineated between the average price at stations that are direct-supplied from refiners and the average price at stations that are supplied by jobbers. (20) Recall that proponents of open supply claim that because rack prices are typically less than DTW prices, if lessee-dealers are allowed to shop around and purchase their gasoline supplies from jobbers, the prices at the pumps will fall. Table 4 shows that this claim is not supported by the data. For both major and nonmajor brands, those stations that are jobber-supplied consistently price their gasoline significantly higher than stations that are supplied directly from the refiner.
Tables 5-8 report the estimates of (1) using all four prices (regular and premium unleaded price, average self-service price, and average station-level price). For each price, the authors include the estimates from each of the three specifications (OLS, fixed-effects, and between-effects) described in the previous section. (21)
Using the entire panel of observations, the OLS estimates of the effect of direct-supply in Tables 5-8 indicate that stations that receive their gasoline supplies directly from the refiner have significantly lower prices--between 1.7 and 2.7 cents per gallon--than similar stations that source gasoline through a jobber. Recall that proponents of open supply argue that enjoying more flexibility in sourcing their product would lead to lower prices. As the OLS results indicate, stations that already have this flexibility in fact price gasoline significantly higher, other things equal.
A more direct test of the claims of open-supply supporters is to examine prices before and after stations switch from jobber- to direct-supply and vice versa. Because of the nature of the fixed-effects estimator, this effect is captured in the estimated fixed-effects coefficient on the direct-supply variable. As Tables 5-8 report, stations that switch from jobber- to direct-supply subsequently price gasoline from 0.6-1.0 cents per gallon lower, implying that stations that make the switch to jobber-supply subsequently increase prices, other things equal. Again, this directly contradicts the claims of dealers who support open supply. (22)
Finally, the between-effects estimator employs an average of prices and other control variables taken at each station across all observations in the data, and then subsequently uses these averages in a cross-sectional regression. Tables 5-8 indicate that average prices across stations that receive their gasoline supplies directly from refiners are 2.4-3.3 cents per gallon lower than average prices at similar jobber-supplied stations. Again, this is inconsistent with the arguments for open supply. (23)
Other results from Tables 5-8 indicate that stations are differentiated by brand, with all brands consistently pricing above (the excluded) independents. OLS and between-effects estimates indicate that majors price gasoline significantly higher than similar independents, whereas fixed-effects estimates indicate that stations that switch from an independent to a major brand subsequently increase price, other things held constant.
Increasing the distance to a station's closest rival has the expected effect of increasing prices. Across each price of gasoline examined, increasing that distance by one mile increases prices by approximately 0.2-1.3 cents per gallon. Additionally, OLS and between-effects estimators indicate that an increase in the number of competitors within a one-mile radius reduces prices, though the magnitude of the effect is relatively small. Interestingly, fixed-effects estimates of the impact of increasing a station's number of competitors within one-mile indicate that an increase in the number of competitors subsequently increases prices. Recall that the fixed-effects estimator captures only within-station changes; thus, the estimated coefficient on the number of competitors reflects that for stations that experience an increase in this number, prices subsequently increase. This likely captures the notion that firms are entering because of attractive pricing environments.
Finally, OLS and between-effects estimates indicate that stations that offer ancillary services, such as convenience stores, car washes, repair services, full service, and pay-at-the-pump, do not price their gasoline any differently than similar stations that do not offer these services, with the exception of pay-at-the-pump. Between-effects estimates indicate that in a cross-sectional context, stations offering pay-at-the-pump technology have significantly lower prices. Fixed-effects estimates indicate that stations adding these ancillary services subsequently price their gasoline higher than before the service change.
In summary, across a variety of prices and specifications, the data indicate that jobber-supplied stations have significantly higher prices, other things equal, than direct-supplied stations. This result casts doubt on the arguments of open-supply proponents who claim that if given more flexibility in sourcing gasoline, prices paid by consumers would decrease. To the contrary, these results indicate that stations that already have this flexibility in buying gasoline have higher retail prices, other things equal.
Unobserved heterogeneity across direct-and jobber-supplied stations, which could create a potential selection bias, is a concern. For instance, assuming uniform DTW prices within zones for direct-supply stations, refiners will likely seek to terminate agreements with those stations that are the most costly to supply, possibly because they are small-volume stations with small tanks that take only partial truck loads. (24) This translates into a higher delivered price for such stations, stations that now must be supplied by jobbers who do not subsidize the delivery to these special stations, and thus prices may rise when stations switch from direct- to jobber-supply. However, note that this does not imply that were one to randomly switch a given station from direct-to jobber-supply, its price would be higher. Importantly, this argument suggests that there may be systematic differences in stations that switch from one type to the other. To test whether stations randomly switch from jobber- to direct-supply, Table 9 presents results from a logit analysis that predicts a switch from one type of supply to the other. Results indicate that stations with larger volumes are in fact significantly less likely to switch from direct- to jobber-supply. This supports the story just told concerning the potential for refiners to drop stations that are relatively expensive to supply, but it also suggests that failing to control for station volume will bias the estimated impact of source of supply. Additionally, Table 9 reports that stations with convenience stores and full service are significantly less likely to switch from jobber- to direct-supply. Recall that the model already explicitly controls for these factors.
Given the results from the logit analysis, in regression results not reported here, station-level volumes were included as control variables. Results on the effect of source of supply were qualitatively unchanged, though the magnitudes of the price differentials were smaller. Thus, although there may be unobserved heterogeneity across stations with different supply options that may help explain the results, obvious measures of this potential heterogeneity do not seem to change qualitatively the results of the previous analysis. (25)
Proponents of open supply claim that having access to more sources of supply will allow lessee-dealers to pass along savings to consumers in the form of lower retail prices for gasoline. Despite continuing lobbying efforts and litigation to mandate open supply, there is currently no jurisdiction with an open supply provision in place. Thus it is currently impossible to determine what the effects, if any, of such regulation would be. However, within the structure of U.S. gasoline distribution today, there exist retailers that already have access to multiple sources of gasoline supplies, thereby allowing an examination of prices at such stations compared to stations that must purchase gasoline from only one source, the refiner. This comparison sheds important light on the likely effects of open-supply regulation.
Using detailed station- and market-level data from the Los Angeles Basin area from 1992-95, the results indicate that jobber-supplied stations (stations that have access to multiple sources of gasoline) price their retail gasoline products higher than similar stations that directly source their supplies from the refiner. This result casts serious doubt on the claims made by supporters of open supply.
Given the competitive nature of the retail gasoline industry, one might expect a priori to find no difference in retail prices across stations that are jobber- or direct-supplied. The existence of such price differences suggests that jobber-supplied stations are different than direct-supplied stations. Such differences could be a function of location (e.g., perhaps jobber-supplied stations are located in less densely populated areas, which could help account for the higher prices), station configuration (e.g., perhaps jobber-supplied stations are more likely to have costly car wash facilities), branding (e.g., perhaps some major refiners are more likely to distribute their products through jobbers than others), or volume (e.g., perhaps refiners choose to allow retailers with smaller volumes to obtain their gasoline supplies from jobbers). Any potential selection bias that would account for the empirical results, however, is likely not a result of the observed heterogeneity described. The empirical model exhausts the rich station-and market-level data to control for these possible selection criteria.
However, there may exist other characteristics not observed here that could help explain the differences documented across stations with alternative sources of supply. For example, the authors do not possess detailed information on more subtle contractual issues related to source of supply. As mentioned previously, lessee-dealers enter into a package of contracts with the refiner that are interrelated. More specific contract data could presumably be used to specify a more complete empirical model that captures currently unobserved differences in the costs of sourcing gasoline.
One potential explanation not yet explored is the desire for major oil companies to eliminate double marginalization at their franchise stations. (26) This is a significant problem for major oil companies that tend to be very concentrated with one brand presence in the market. Refiners can deal with the issue of double marginalization using a variety of vertical controls (e.g., resale price maintenance, minimum volume requirements, and awards and discounts based on volume thresholds. (27) However, there is much less incentive for jobbers, who very often market multiple brands in their distribution systems, to enforce vertical controls within their own network of stations. (28) This disparity in the controls on retailers across direct- and jobber-supplied stations could partially account for the higher prices observed at jobber-supplied stations. Again, without more information about the specific contracts that stations enter with their suppliers, however, it is difficult to determine if this potential explanation has merit.
Clearly, more research is needed to assess the likely impact of open supply on retail gasoline prices. Data rich with specific contractual details would allow researchers to examine the components of supply contracts that are most important in determining differences in price. Additionally, replications of this study using other sources of data for other metropolitan areas would be useful.
TABLE 1 Proportion of Direct-Supplied Stations in Los Angeles, 1992-96 Direct-Supplied/ Total Stations Percentage 1992 3688/4377 84.26 1993 3544/4313 82.17 1994 3397/4250 79.93 1995 3293/4181 78.76 1996 3265/4119 79.27 Source: Whitney-Leigh census surveys, Los Angeles 1992-96. TABLE 2 Average Station Characteristics in Los Angeles, 1992-95 Census of Price Stations Surveys Direct supplied (%) 82.9 84.5 Distance to closest 0.30 0.28 competitor (in miles) (0.61) (0.57) Number of competitors 6.42 6.12 in one-mile radius (5.08) (3.50) Stations with car wash (%) 6.6 7.2 Stations with repair services (%) 49.9 54.4 Stations with convenience store (%) 32.9 29.6 Stations with full service (%) 32.7 37.2 Stations with pay-at-the-pump (%) 36.9 36.8 Brand is Arco (%) 14.9 14.9 Brand is Chevron (%) 12.7 15.8 Brand is Exxon (%) 0.9 2.5 Brand is Mobil (%) 15.2 14.8 Brand is Shell (%) 12.7 14.0 Brand is Texaco (%) 8.4 9.6 Brand is Unocal (%) 16.6 14.7 Brand is Independent (%) 18.6 13.7 Notes: Standard deviations are in parentheses. Source: Whitney-Leigh census and price surveys, Los Angeles 1992-95. TABLE 3 Station-Level Changes in Los Angeles, 1992-95 Number of Type of Change Stations Change to direct supply from 19 jobber supply Change from direct supply to 110 jobber supply Change in distance to closest 153 competitor Change in number of competitors 635 in one-mile radius Change to car wash 11 Change from car wash 8 Change to repair services 40 Change from repair services 77 Change to convenience store 24 Change from convenience store 40 Change to full service 31 Change from full service 126 Change to pay-at-the-pump 165 Change from pay-at-the-pump 0 Change to Arco 14 Change from Arco 15 Change to Chevron 19 Change from Chevron 8 Change to Exxon 0 Change from Exxon 34 Change to Mobil 25 Change from Mobil 17 Change to Shell 10 Change from Shell 10 Change to Texaco 17 Change from Texaco 32 Change to Unocal 9 Change from Unocal 7 Change to independent 60 Change from independent 31 Notes: The average change in distance to closest competitor is 0.057 miles with a range of [-2.67, 3.74]. The average change in number of competitors in a one-mile radius is -0.157 with a range of [-4, 5]. Source: Whitney-Leigh price surveys, Los Angeles 1992-95. TABLE 4 Average Prices of Self-Service Regular Unleaded Gasoline in Los Angeles, 1992-95 Major Brand Nonmajor Brand Direct Jobber Direct Jobber Supplied Supplied Supplied Supplied 1992 $1.20 $1.21 $1.17 $1.19 (a) (0.04) (0.05) (0.05) (0.04) 1993 1.24 1.29 (a) 1.18 1.24 (a) (0.05) (0.09) (0.05) (0.07) 1994 1.16 1.19 (a) 1.09 1.12 (a) (0.05) (0.09) (0.05) (0.06) 1995 1.20 1.27 (a) 1.12 1.18 (a) (0.07) (0.10) (0.06) (0.09) Notes: Prices are in 1991 dollars. Standard deviations are in parentheses. (a) Jobber-supplied price is greater than the direct-supplied price at the 1% (one-tail) significance level. Source: Whitney-Leigh price surveys, Los Angeles 1992-95 TABLE 5 Effect of Source of Supply on Self-service Regular Unleaded Prices OLS Fixed-Effects Direct supplied -2.698 *** -1.040 *** (0.808) (0.265) Distance to closest competitor in miles 1.323 * 0.596 * (0.677) (0.326) Number of competitors in one-mile radius -0.174 * 0.096 ** (0.043) (0.048) Car wash 0.259 1.131 ** (0.367) (0.472) Repair services -0.143 0.513 ** (0.327) (0.213) Convenience store -0.091 1.421 *** (0.358) (0.230) Full service 0.388 -0.150 (0.284) (0.183) Pay-at-the--pump -0.274 0.593 *** (0.239) (0.124) Arco 2.453 *** 2.608 *** (0.777) (0.455) Chevron 9.527 *** 6.048 *** (0.844) (0.585) Exxon 5.555 *** 3.711 *** (0.972) (0.385) Mobil 8.489 *** 5.334 *** (0.845) (0.390) Shell 8.327 *** 8.378 *** (0.801) (0.655) Texaco 7.965 *** 6.879 *** (0.779) (0.388) Unocal 9.019 *** 7.405 *** (1.064) (1.042) Orange Count -0.086 (0.297) San Bernardino County 3.926 *** (0.559) Riverside County 2.516 *** (0.377) Ventura County 5.460 *** (0.324) Intercept 102.451 *** 102.126 *** (0.685) (0.477) Observations 12,742 12,742 Adjusted [R.sup.2] 0.77 0.83 Number of station in panel 785 785 Between-Effects Direct supplied -3.307 *** (0.530) Distance to closest competitor in miles 0.289 ** (0.116) Number of competitors in one-mile radius -0.143 *** (0.039) Car wash 0.333 (0.516) Repair services -0.220 (0.372) Convenience store -0.342 (0.376) Full service -0.083 (0.380) Pay-at-the--pump -1.188 *** (0.377) Arco 3.137 *** (0.666) Chevron 10.869 *** (0.641) Exxon 7.158 *** (1.056) Mobil 9.603 *** (0.642) Shell 9.353 *** (0.644) Texaco 9.234 *** (0.630) Unocal 9.936 *** (0.629) Orange County -0.145 (0.402) San Bernardino County 3.828 *** (0.458) Riverside County 3.177 *** (0.494) Ventura County 5.220 *** (0.449) Intercept 102.830 *** (9.406) Observations 12,742 Adjusted [R.sup.2] 0.65 Number of stations in panel 785 Notes: Robust standard errors in parentheses. Dependent variable: self-service regular unleaded price. * Singnificant at 10%. ** Significant at 5%. *** Significant at 1%. TABLE 6 Effect of Source of Supply on Self-service Premium Unleaded Prices OLS Fixed-Effects Direct supplied -2.002 *** -0.973 *** (0.725) (0.283) Distance to closest competitor in miles 1.068 * 0.207 (0.587) (0.348) Number of competitors in one-mile radius -0.087 ** 0.129 ** (0.044) (0.052) Car wash 0.407 1.590 *** (0.382) (0.534) Repair services 0.299 0.083 (0.342) (0.229) Convenience store 0.317 1.928 *** (0.367) (0.245) Full service 0.909 *** 0.236 (0.306) (0.195) Pay-at-the-pump -0.384 0.596 *** (0.260) (0.133) Arco 1.520 ** 2.958 *** (0.758) (0.489) Chevron 11.112 *** 8.562 *** (0.821) (0.623) Exxon 7.334 *** 6.235 *** (0.934) (0.411) Mobil 10.182 *** 7.591 *** (0.818) (0.415) Shell 9.764 *** 9.583 *** (0.782) (0.699) Texaco 9.709 *** 8.448 *** (0.779) (0.411) Unocal 11.629 *** 13.737 *** (0.964) (1.110) Orange County -0.566 * (0.329) San Bernardino County 3.179 *** (0.486) Riverside County 1.840 *** (0.396) Ventura County 4.847 *** (0.367) Intercept 117.796 *** 116.894 *** (0.727) (0.512) Observations 12,598 12,598 Adjusted [R.sup.2] 0.76 0.79 Number of stations in panel 777 777 Between-Effects Direct supplied -2.598 *** (0.546) Distance to closest competitor in miles 0.225 * (0.117) Number of competitors in one-mile radius -0.166 *** (0.040) Car wash 0.653 (0.523) Repair services 0.576 (0.379) Convenience store -0.059 (0.384) Full service 0.255 (0.386) Pay-at-the-pump -1.175 *** (0.382) Arco 2.367 *** (0.692) Chevron 12.631 *** (0.667) Exxon 8.957 *** (1.097) Mobil 11.375 *** (0.665) Shell 11.023 *** (0.670) Texaco 11.010 *** (0.654) Unocal 12.659 *** (0.653) Orange County -0.513 (0.408) San Bernardino County 3.144 *** (0.465) Riverside County 2.299 *** (0.508) Ventura County 4.534 *** (0.456) Intercept 109.650 *** (9.768) Observations 12,598 Adjusted [R.sup.2] 0.73 Number of stations in panel 777 Notes: Robust standard errors in parentheses. Dependent variable: self-service premium unleaded price. * Significant at 10%. ** significant at 5%. *** significant at 1%. TABLE 7 Effect of Source of Supply on Average Self-Service Prices OLS Fixed-Effects Direct supplied -1.784 ** -0.796 *** (0.745) (0.259) Distance to closest competitor in miles 1.181 ** 0.409 (0.592) (0.319) Number of competitors in one-mile radius -0.052 0.127 *** (0.044) (0.047) Car wash 0.536 1.087 ** (0.365) (0.463) Repair services 0.114 0.513 ** (0.334) (0.209) Convenience store -0.141 1.147 *** (0.360) (0.225) Full service 0.758 ** 0.041 (0.303) (0.179) Pay-at-the-pump -0.101 0.691 *** (0.246) (0.122) Arco 0.787 2.575 *** (0.737) (0.446) Chevron 12.716 *** 8.576 *** (0.810) (0.572) Exxon 6.812 *** 5.038 *** (0.930) (0.377) Mobil 11.702 *** 7.382 *** (0.811) (0.381) Shell 11.569 *** 9.865 *** (0.765) (0.642) Texaco 9.885 *** 7.721 *** (0.766) (0.377) Unocal 12.050 *** 10.004 *** (1.012) (1.020) Orange County -0.851 *** (0.302) San Bernardino County 2.447 *** (0.534) Riverside County 0.998 ** (0.412) Ventura County 4.373 *** (0.370) Intercept 105.564 *** 105.945 *** (0.667) (0.467) Observations 12,748 12,748 Adjusted [R.sup.2] 0.79 0.82 Number of stations in panel 786 786 Between-Effects Direct supplied -2.413 *** (0.533) Distance to closest competitor in miles 0.307 *** (0.117) Number of competitors in one-mile radius -0.118 *** (0.039) Car wash 0.499 (0.522) Repair services 0.153 (0.376) Convenience store -0.279 (0.380) Full service 0.358 (0.385) Pay-at-the-pump -1.070 *** (0.382) Arco 1.605 ** (0.673) Chevron 13.916 *** (0.648) Exxon 8.183 *** (1.071) Mobil 12.640 *** (0.649) Shell 12.535 *** (0.651) Texaco 11.162 *** (0.635) Unocal 12.684 *** (0.636) Orange County -0.864 ** (0.406) San Bernardino County 2.357 *** (0.464) Riverside County 1.548 *** (0.500) Ventura County 4.216 *** (0.454) Intercept 99.679 *** (9.521) Observations 12,748 Adjusted [R.sup.2] 0.76 Number of stations in panel 786 Notes: Robust standard errors in parentheses. Dependent variable: average self-service price. * Significant at 10%. ** significant at 5%. *** Significant at 1%. TABLE 8 Effect of Source of Supply on Average Station Prices OLS Fixed-Effects Direct supplied -1.718 ** -0.643 ** (0.716) (0.259) Distance to closest competitor in miles 1.179 ** 0.367 (0.558) (0.281) Number of competitors in one-mile radius -0.033 0.119 ** (0.055) (0.048) Car wash 0.756 * 1.304 *** (0.413) (0.451) Repair services 0.114 0.306 (0.383) (0.210) Convenience store -0.063 1.126 *** (0.405) (0.233) Full service 3.752 *** 2.072 *** (0.386) (0.181) Pay-at-the-pump -0.616 ** 0.573 *** (0.282) (0.126) Arco 1.124 2.095 *** (0.731) (0.459) Chevron 12.851 *** 8.891 *** (0.806) (0.589) Exxon 6.340 *** 5.374 *** (0.962) (0.387) Mobil 11.650 *** 7.614 *** (0.802) (0.392) Shell 11.380 *** 9.813 *** (0.747) (0.662) Texaco 10.789 *** 7.806 *** (0.834) (0.379) Unocal 12.560 *** 4.827 *** (1.014) (0.863) Orange County -1.011 *** (0.343) San Bernardino County 2.555 *** (0.625) Riverside County 1.432 *** (0.523) Ventura County 4.190 *** (0.431) Intercept 105.738 *** 107.619 *** (0.720) (0.466) Observations 12,930 12,930 Adjusted [R.sup.2] 0.78 0.81 Number of stations in panel 795 795 Between-Effects Direct supplied -2.416 *** (0.606) Distance to closest competitor in miles 0.267 ** (0.134) Number of competitors in one-mile radius -0.086 * (0.044) Car wash 0.824 (0.594) Repair services 0.270 (0.424) Convenience store -0.131 (0.432) Full service 3.665 *** (0.430) Pay-at-the-pump -1.665 *** (0.436) Arco 2.051 *** (0.765) Chevron 13.909 *** (0.734) Exxon 7.170 *** (1.200) Mobil 12.638 *** (0.735) Shell 12.364 *** (0.739) Texaco 11.944 *** (0.716) Unocal 12.909 *** (0.721) Orange County -1.102 ** (0.462) San Bernardino County 2.334 *** (0.530) Riverside County 1.759 *** (0.566) Ventura County 4.104 *** (0.517) Intercept 102.179 *** (10.676) Observations 12,930 Adjusted [R.sup.2] 0.75 Number of stations in panel 795 Notes: Robust standard errors in parentheses. Dependent variable: average station price. * Significant at 10%. ** Significant at 5%. *** Significant at 1%. TABLE 9 Logit Estimation of Probability of Switching to Jobber- or Direct-Supply Odds Ratio of Odds Ratio of Changing to Changing to Dependent Variable Jobber-Supply Direct-supply Distance to closest 0.907 1.095 competitor in miles (0.202) (0.068) Number of competitors 0.943 1.081 in one-mile radius (0.049) (0.066) Car wash 1.830 (1.472) Repair services 1.485 0.821 (0.771) (0.398) Convenience store 0.794 0.248 ** (0.392) (0.172) Full service 0.649 0.063 *** (0.318) (0.066) Pay-at-the-pump 0.481 1.218 (0.371) (0.741) Total volume 0.819 *** 0.984 (0.038) (0.040) Observations 731 674 Notes: Reported coefficients are changes in the odds ratio: robust standard errors in parentheses. * Significant at 10%. ** Significant at 5%. *** Significant at 1%.
Contemporary Economic Policy
Vol. 22, No. 1, January 2004, 63-77
DTW: Dealer Tank Wagon
FTC: Federal Trade Commission
OLS: Ordinary Least Squares
[C] Western Economic Association International
(1.) Some contracts allow lessee-dealers to purchase incremental gasoline from other suppliers after purchasing some minimum amount from the lessor-refiner. These incremental gallons must be sold from pumps that are clearly marked with signage informing the customer that the gasoline was purchased from someone other than the refiner whose brand appears on the station. In practice, these incremental purchases are rarely made.
(2.) The lengths of typical lease and supply contracts are between three and ten years.
(3.) There are several reasons for this, including the fact that the jobber picks up the gasoline at the rack, saving the refiner the cost of delivery. However, when prices are changing quickly and by significant amounts, the rack price will at times rise above the DTW price. When this happens, an inversion occurs.
(4.) Bill Ligon, Lundberg Letter, "Class-of-Trade Price Warfare: Proliferating Below-Cost Pricing," 21 March 1986, p. 5. Also see Hogarty et al. (1987, p. 60).
(5.) California SB 404 proposed that "a refiner, distributor, manufacturer, or transporter of petroleum products may not prevent a branded gasoline franchisee from purchasing that franchisee's branded petroleum product from any location or through any vendor in the franchiser's wholesale petroleum product network."
(6.) Transcripts of the FTC sessions are available online at www.ftc.gov/bc/gasconf/020509petroleumtrans.pdf.
(7.) HRN was just overturned (13 February 2003) on appeal and may still go to trial according to sources close to the case.
(8.) Some refiners sell only branded gasoline through the rack at what is called the branded rack price. If gasoline is branded, then the refiner requires that its name be associated with the marketing and sale of the product. Some refiners sell only unbranded gasoline through the rack at an unbranded rack price. Marketers of unbranded gasoline may retail it under their own brand name, such as Thrifty or USA. Branded gasoline will usually have some proprietary additives that differentiate the gasoline from generic, unbranded gasoline. Still other refiners sell both branded and unbranded gasoline through their rack. Typically, the branded rack price is higher than the unbranded rack price.
(9.) For an excellent but rather dated history and summary of various court cases and legislative bills, see Hogarty et al. (1987).
(10.) Two forms of open supply have been proposed. A strong version of open supply would allow lessee-dealers the right to purchase gasoline from any supplier, regardless of brand. A weaker version allows for the purchase of gasoline from any supplier selling only the same brand as the lessee-dealer's current brand affiliation.
(11.) See Hogarty et al. (1987) for a discussion of these issues related to open supply.
(12.) Another interesting and somewhat related line of literature examines the impact on retail prices of so-called divorcement legislation that prohibits major oil companies from vertically integrating into retail markets, thus eliminating the company-operated station from the market. Studies have found that eliminating vertical integration results in a higher retail price of gasoline (see, e.g., Barron and Umbeck, 1984; Blass and Carlton, 2001; and Vita, 2000). It remains unclear, however, whether one can make inference from the divorcement literature with respect to the issue of open supply because divorcement does not eliminate direct-supplied stations from the market, only those that are owned and operated by refiners.
(13.) The price surveys were typically taken in January, March, May, July, September, and November of each year. There are several surveys, however, that occur in other months. These surveys are also included in the sample.
(14.) There are numerous studies that examine the pricing of retail gasoline. The reduced-form empirical specification, described later, is consistent with this literature. See, for example, Barron et al. (2000, 2002), Borenstein (1991), and Shepard (1991).
(15.) Research shows that the density of stations does affect the retail price, and the authors' own discussions with dealers suggest that the distance to the nearest station also affects the price (Barron et al. 2000, 2002).
(16.) This assertion is supported by Table 3. No station in the sample changes from having pay-at-the-pump technology to not having such technology. Note also that interactions of the pay-at-the-pump dummy variable with either the direct-supply dummy variable or the specific contractual form of the station (i.e., company-operated, lessee-dealer, open-dealer, or jobber) were never statistically significantly different from the main effect of having pay-at-the-pump.
(17.) The Huber-White method to control for within-station correlation of the errors adjusts the covariance matrix of the estimated coefficients to account for the possibility that cov([e.sub.it], [e.sub.ik]) [not equal to] 0, [for all]t[not equal to] k.
(18.) The fixed effects are defined over stations in the data. The fixed-effects estimation procedure is equivalent to the use of OLS with the inclusion of station-specific dummy variables on the right-hand side of (1). In a fixed-effects specification, all time-invariant variables are dropped from the model. For example, because no stations switch from one county to another, county effects are not estimated.
(19.) The between estimator calculates the average price, station, and market characteristics for station i across all t and then uses these averages to estimate a purely cross-sectional regression. Another option, the random-effects estimator that assumes the [v.sub.i] are random, was strongly rejected by the data using a Hausman (1978) test.
(20.) Major brands in the LA area during the sample period included Arco, Chevron, Exxon, Mobil, Shell, Texaco, and Unocal. All other brands are considered independents.
(21.) Estimates of station and survey date fixed effects, though jointly significant, are not reported for brevity.
(22.) Note that although the fixed-effects estimator captures the effects of within-station change, the sample size is equal to that for the OLS estimator. The fixed-effects estimator uses all of the observations for each station.
(23.) Jobber-supplied stations may be supplied with either branded gasoline or unbranded gasoline. If the authors distinguish between jobber-supplied stations selling major and nonmajor gasoline, it is found that jobber-supplied stations selling a major brand consistently have higher prices than direct-supplied (major and nonmajor) stations. Jobber-supplied stations selling a nonmajor brand of gasoline have a higher self-service regular unleaded price than direct-supplied stations, but price no differently than direct-supplied stations for all other grades. Though it is customary to report sample sizes for the pooled sample when using the between-effects estimator, the true sample size in the between-effects estimation is the number of unique stations observed in the data.
(24.) A description of such zone pricing can be found in the 20 March 2000 edition of the Wall Street Journal (p. 1, 4).
(25.) Additionally, we experimented with various specifications that included interactions between many of our control variables. Importantly, we found no systematic differences across various brands, station-level characteristics, or market-level characteristics that would explain the effect of direct supply on gasoline prices.
(26.) The double-marginalization problem describes a situation in which the downstream franchisee sells a lower volume at a higher price than would be optimal from the perspective of the upstream franchiser.
(27.) In 1997, the U.S. Supreme Court, in State Oil v. Kahn, ruled that refiners could use such vertical controls in their dealings with downstream franchisees.
(28.) The authors are aware of jobbers who distribute six different brands of gasoline.
Barron, J.M., and J.R. Umbeck. "The Effects of Different Contractual Arrangements: The Case of Retail Gasoline Markets." Journal of Law and Economics, 27(2), 1984, 313-28.
Barron, J. M., B. A. Taylor, and J. R. Umbeck. "A Theory of Quality-Related Differences in Retail Margins: Why There Is a 'Premium' on Premium Gasoline." Economic Inquiry, 38(4), 2000, 550-69.
--. "Number of Sellers, Average Prices, and Price Dispersion: A Theoretical and Empirical Investigation." Purdue University. Working paper, 2002.
Blass, A.A., and D.W. Carlton. "The Choice of Organizational Form in Gasoline Retailing and the Cost of Laws that Limit that Choice." Journal of Law and Economics, 44(2), 2001, 511-24.
Borenstein, S. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins." RAND Journal of Economics, 22(3), 1991, 354-69.
Comanor, W.S., and J.M. Riddle. "The Costs of Regulation: Branded Open Supply and Uniform Pricing of Gasoline." UCLA. Working paper, 2002.
Hausman, J. A. "Specification Tests in Econometrics." Econometrica, 46(6), 1978, 1251-71.
Hogarty, T.F., P. Lindstrom, and F. Smith. "Analytics of Proposals to Compel Open Supply." American Petroleum Institute Research Study 42, 1987.
Shepard, A. "Price Discrimination and Retail Configuration." Journal of Political Economy, 99(1), 1991, 30-53.
Vita, M. G. "Regulatory Restrictions on Vertical Integration and Controls: The Competitive Impact of Gasoline Divorcement Policies." Journal of Regulatory Economics, 18(3), 2000, 217-33.
JOHN M. BARRON, BECK A. TAYLOR, and JOHN R. UMBECK *
* This is a revision of a paper presented at the Western Economic Association International annual conference, Seattle, WA, July 2002. The authors thank Ted Frech, Tom Hogarty, Ron Johnson, Glen Waddell, seminar participants at the Federal Trade Commission, and two anonymous referees for helpful comments on earlier drafts. A portion of Taylor's work was completed while a visiting scholar at Harvard University.
Barron: Professor, Department of Economics, Purdue University, W. Lafayette, IN 47907-1310. Phone 1-765-494-4451; Fax 1-765-494-9658; E-mail firstname.lastname@example.org
Taylor: W. H. Smith Professor of Economics, Department of Economics, Baylor University, Waco, TX 76798-8003. Phone 1-254-710-4549; Fax 1-254-710-6142; E-mail email@example.com
Umbeck: Professor, Department of Economics, Purdue University, W. Lafayette, IN 47907-1310. Phone 1-765-494-4447; Fax 1-765-494-9658; E-mail firstname.lastname@example.org
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|Author:||Barron, John M.; Taylor, Beck A.; Umbeck, John R.|
|Publication:||Contemporary Economic Policy|
|Date:||Jan 1, 2004|
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