Who Do Managers Perceive As Competitors? Real Time Competitive Interactions

Abstract

This paper explains why spatial distance and competitor similarity influence firm identification of perceived competitors in geographically differentiated markets. In contrast to prior studies that have used surveys or geographic area to identify competitors, I identify the revealed relative importance of a firm’s competitors by examining the competitive actions and responses of firms using data that captures the timing of price changes in the Los Angeles retail gas market. Consistent with predictions, I find that managers monitor a very small number of rivals. The results demonstrate that distance to a rival and similarity between competitors on price and the number of pumps at a station interact to influence the weights assigned to competitors.