When do switching costs make markets more or less competitive? |
| |
| Institution: | 1. Shanghai University of Finance and Economics, School of Economics, Guoding Road 777, Shanghai 200433, China;2. Korea University, Department of Economics, Sungbuk-gu Anam-ro 145, Seoul 136-701, Republic of Korea;3. Institute of Economic Theory I, Humboldt University at Berlin, Spandauer Str. 1, 10178 Berlin, Germany;1. CREST (LMI), 15 Boulevard Gabriel Péri, 92245 Malakoff, France;2. University of Mannheim, L7, 3-5 68131 Mannheim, Germany;3. CREST (LEI), 15 Boulevard Gabriel Péri, 92245 Malakoff, France;1. School of Social Sciences, University of Manchester, UK;2. Imperial College London, University of Rome II and CEPR. Address: Imperial College Business School, South Kensington Campus, London SW7, 2AZ, UK;1. Departamento de Dirección y Gestión de Empresas, Facultad de Economía y Empresa, Universidad Diego Portales, Avenida Santa Clara 797, 8580000 Huechuraba, Chile;2. Universidad Alberto Hurtado, Erasmo Escala 1835, 8340539 Santiago, Chile;1. Morrison Chair of Agribusiness, Morrison School of Agribusiness, W. P. Carey School of Business, Arizona State University, Mesa, AZ 85212, United States;2. Department of Economics, Orfalea School of Business, California Polytechnic State University San Luis Obispo, San Luis Obispo, CA, United States;3. DeGroot School of Business, McMaster University, Hamilton, ON, United States |
| |
| Abstract: | In a two-period duopoly setting in which switching costs are the only reason why products may be perceived as differentiated, we provide necessary and sufficient conditions for switching costs to lead to higher prices in the first period as well as to higher overall profitability. We show that this happens if and only if switching costs are not too large. We present the only treatment up to date of how switching costs (and only switching costs) affect competition based on the assumption that switching costs differ across consumers, which allows us to illustrate the undesired byproduct of assuming that products exhibit substantial horizontal differentiation. Not only do we draw implications for the classical literature on competition with switching costs, but also for the more recent one that rests upon such an assumption too. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
