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Discussion Paper Details

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Full Details

Title: Strategic Entry and Potential Competition: Evidence from Compressed Gas Fuel Retail

Author(s): Giulia Pavan, Andrea Pozzi and Gabriele Rovigatti

Publication Date: June 2017

Keyword(s): potential entrants, preemption and retail fuel market

Programme Area(s): Industrial Organization

Abstract: We provide novel evidence on the effect of the threat of potential competition on the timing of entry in a new and growing industry. Exploiting a change in regulation in the Italian retail fuel market that generates exogenous variation in the number of potential entrants in the emerging Compressed Natural Gas segment, we show that markets with a higher number of potential entrants witness speedier entry decisions by firms managers. We document that this result is likely driven by an increase in the incentives to preempt the market due to heightened risk of being anticipated by competitors.

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Bibliographic Reference

Pavan, G, Pozzi, A and Rovigatti, G. 2017. 'Strategic Entry and Potential Competition: Evidence from Compressed Gas Fuel Retail'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12113