Blazing a Trail: Amsterdam Cannabis “Coffeeshops” and Competitive Action in Response to Sanctions (2009-2018)
Abstract
In core-stigmatized industries, where misconduct is pervasive and stakeholders like suppliers and customers may encourage illicit behavior, how does sanctioning shape competitive action among firms? While prior research on the sanctioning of misbehavior has largely ignored these contexts, we argue that firm competitive dynamics play a crucial role in shaping the response to punishment when other mechanisms are absent. Leveraging a novel dataset on cannabis menus and enforcement sanctions among Amsterdam's notorious semi-illegal “coffeeshops” from 2009-2018, we observe product entry and price cuts as competitive actions among dyadic rivals in response to sanctions. Challenging the assumption that competition is temporarily suppressed in the aftermath of punishment, we find that a sanctioned coffeeshop is more likely to initiate competitive action to signal resilience to a rival. Concurrently, we find that in the aftermath of punishment, a sanctioned coffeeshop is also more likely to receive competition action from a rival to reprimand behavior that threatens the strategic ambiguity of grey markets. Moreover, the reprimanding effect is stronger from rivals who have not been sanctioned. Our paper makes several contributions to social control theory, competitive dynamics research, and the literature on stigmatized organizations.
Authors: Laura Dupin (Amsterdam Business School) and Alessandro Piazza (Rice University)
This seminar will take place in person in room T09-67. Alternatively, click here or use the information below to join the seminar online through Zoom.
Meeting ID: 996 6474 7290
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