Effectiveness of Merger Remedies: Evidence from the Retail Gasoline Industry

49 Pages Posted: 6 Dec 2016 Last revised: 22 Jun 2018

Vicente Lagos

Telecom ParisTech

Date Written: June 2018

Abstract

This article assesses the impact of a merger in a retail gasoline industry and evaluates the effectiveness of outlet divestitures as remedies. Results show a modest but significant increase in margins of gas stations impacted by higher market concentration. Divestitures are effective in disciplining this anticompetitive effect, but only for competing gas stations located within a 1 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, margins of at least one of the merging parties significantly decreased in locations unaffected by higher concentration, evidencing the presence of efficiency gains.

Keywords: Divestitures, Gasoline Retail Markets, Merger Evaluation, Merger Remedies

JEL Classification: K21, L13, L41, L81

Suggested Citation

Lagos, Vicente, Effectiveness of Merger Remedies: Evidence from the Retail Gasoline Industry (June 2018). Available at SSRN: https://ssrn.com/abstract=2880135 or http://dx.doi.org/10.2139/ssrn.2880135

Vicente Lagos (Contact Author)

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

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