Working Paper: CEPR ID: DP18297
Authors: Kai Fischer; Simon Martin; Philipp Schmidt-Dengler
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 Codes: D22; L11; D83; L81; R32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market entry (L17) | Price distribution (D39) |
| Market entry (L17) | Price reduction (D49) |
| Market entry (L17) | Gross margins (D49) |
| Market entry (L17) | Price reduction for informed consumers (D40) |
| Market entry (L17) | First-order stochastic dominance of price distribution (D39) |