The Heterogeneous Effects of Entry on Prices

59 Pages Posted: 26 Jul 2023

See all articles by Kai Fischer

Kai Fischer

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Simon Martin

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Philipp Schmidt-Dengler

University of Vienna - Faculty of Business, Economics, and Statistics

Date Written: 2023

Abstract

We study the effect of entry on the price distribution in the German retail gasoline market. Exploiting more than 700 entries over five years in an event study design, we find that entry causes a persistent first-order stochastic shift in the price distribution. Prices at the top of the distribution change moderately only, but prices at the left tail decrease by up to 12% of stations’ gross margins. Consumers with easy access to information on prices gain the most from entry. The reduction in transaction prices is 32-44% stronger for fully informed consumers than for uninformed consumers.

Keywords: entry, information frictions, price distribution, (unconditional) quantile treatment effects

JEL Classification: D220, L110, D830, L810, R320

Suggested Citation

Fischer, Kai and Martin, Simon and Schmidt-Dengler, Philipp, The Heterogeneous Effects of Entry on Prices (2023). CESifo Working Paper No. 10566, Available at SSRN: https://ssrn.com/abstract=4521266 or http://dx.doi.org/10.2139/ssrn.4521266

Kai Fischer (Contact Author)

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Simon Martin

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Philipp Schmidt-Dengler

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

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