Smart entry in local retail markets for electricity and natural gas

Arbeitspapier

Consider a market with switching costs that is initially served by a monopolistic incumbent. How can a competitor successfully enter this market? We show that an offer to undercut the incumbent by a fixed margin serves this purpose. This strategy dominates traditional entry where the entrant just offers a lower price because it restrains the ability of the incumbent to block entry by limit pricing. We also consider adding a price ceiling to insure customers against future price increases. While this has a strategic advantage in markets with elastic demand, it is too risky if substantial cost increases are possible.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Volkswirtschaftliche Diskussionsbeiträge ; No. 2009,3

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Monopolization; Horizontal Anticompetitive Practices
• Subject: Entry strategies ; Price competition ; Electricity ; Natural gas ; Markteintrittsstrategien ; Preiswettbewerb ; Strommarkt ; Erdgasmarkt ; Kommunale Energiewirtschaft ; Markteintritt ; Wechselkosten ; Preiswettbewerb ; Wettbewerbsstrategie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bartholomae, Florian W. ; Morasch, Karl ; Tóth, Rita Orsolya
• Event: Veröffentlichung
• (who): Universität der Bundeswehr München, Fachgruppe für Volkswirtschaftslehre
• (where): Neubiberg
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/32837
• Last update: 10.03.2025, 11:43 AM CET