Strategic investment, multimarket interaction and competitive advantage: An application to the natural gas industry

Robert Ritz

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This paper presents a game-theoretic analysis of multimarket competition with strategic capacity investments, motivated by recent developments in international natural gas markets. It studies the competitive implications of heterogeneity in firm structure arising from asset specificity. A single-market focus confers advantage even in the absence of superior value or cost. Lower costs and a sharper organizational focus are self-enforcing in generating competitive advantage. This establishes a novel connection between two of Porter’s “generic strategies”. The model speaks to competition between pipeline gas and liquefied natural gas (LNG) and the global impacts of the Fukushima nuclear accident.

Keywords: Competitive advantage; strategic commitment; generic strategies; cost pass-through; value capture (search for similar items in EconPapers)
Date: 2016-01-12
New Economics Papers: this item is included in nep-com, nep-ene and nep-reg
Note: rar36
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1603

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