Strategic entry and potential competition: Evidence from compressed gas fuel retail |
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| Institution: | 1. Compass Lexecon, Spain;2. EIEF and CEPR, Italy;3. Bank of Italy, Italy;1. Department of Economics, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands;2. Department of Business Sciences, Sapientia University, Pia?a Libert??ii nr. 1, Miercurea Ciuc 530104, Romania;3. Kelley School of Business, Indiana University, 1309 E. 10th St, Bloomington, IN 47405, USA;1. Research Institute of Industrial Economics (IFN) and University of Gothenburg, Box 640, SE-405 30, Göteborg, Sweden;2. Research Institute of Industrial Economics (IFN), Box 55665, SE-102 15, Stockholm, Sweden;1. Department of Economics, University of California, Irvine, United States;2. Departament d’Economia and CREIP, Universitat Rovira i Virgili, Spain;1. Department of Economics, Università Bocconi, Italy;2. CSEF, Italy;3. CEPR, UK;4. ICREA-Universitat Pompeu Fabra and Barcelona Graduate School of Economics, Spain |
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| 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. 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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