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

38 Pages Posted: 4 Jul 2017 Last revised: 24 Sep 2018

See all articles by Giulia Pavan

Giulia Pavan

University of Toulouse 1 - Toulouse School of Economics (TSE)

Andrea Pozzi

Einaudi Institute for Economics and Finance (EIEF)

Gabriele Rovigatti

Bank of Italy; University of Rome Tor Vergata; University of Chicago Booth School of Business

Date Written: June 2017

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.

Keywords: potential entrants, preemption, retail fuel market

JEL Classification: L12, L22, L81

Suggested Citation

Pavan, Giulia and Pozzi, Andrea and Rovigatti, Gabriele, Strategic Entry and Potential Competition: Evidence from Compressed Gas Fuel Retail (June 2017). CEPR Discussion Paper No. DP12113. Available at SSRN: https://ssrn.com/abstract=2996658

Giulia Pavan (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Andrea Pozzi

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Gabriele Rovigatti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

University of Rome Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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