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

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  • Pozzi, Andrea
  • Pavan, Giulia
  • Rovigatti, Gabriele

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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  • Pozzi, Andrea & Pavan, Giulia & Rovigatti, Gabriele, 2017. "Strategic Entry and Potential Competition: Evidence from Compressed Gas Fuel Retail," CEPR Discussion Papers 12113, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12113
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    Cited by:

    1. Cappelletti, Matilde & Giuffrida, Leonardo M., 2021. "Procuring survival," ZEW Discussion Papers 21-093, ZEW - Leibniz Centre for European Economic Research.
    2. Alderighi, Marco & Nicolini, Marcella, 2022. "Strategic information disclosure in vertical markets," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    3. Pessoa, Joao Paulo & Santos, Roberto Amaral & Chimeli, Ariaster, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," SocArXiv 7tvgy, Center for Open Science.
    4. Pavan, Giulia, 2017. "Green Car Adoption and the Supply of Alternative Fuels," TSE Working Papers 17-875, Toulouse School of Economics (TSE).
    5. Lorenzo Magnolfi & Camilla Roncoroni, 2023. "Estimation of Discrete Games with Weak Assumptions on Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(4), pages 2006-2041.
    6. Roberto Amaral-Santos & Ariaster Chimeli & Joao Paulo Pessoa, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," Working Papers, Department of Economics 2023_07, University of São Paulo (FEA-USP).

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    More about this item

    Keywords

    Preemption; Potential entrants; Retail fuel market;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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