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Do Switching costs make markets less competitive?

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The conventional wisdom in economic theory holds that switching costs make markets less competitive. This article challenges this claim. The authors formulate an empirically realistic model of dynamic price competition that allows for differentiated products and imperfect lock-in. They calibrate this model with data from frequently purchased packaged goods markets. These data are ideal in the sense that they have the necessary variation to identify switching costs separately from consumer heterogeneity. Equally important, consumers exhibit inertia in their brand choices, a form of psychological switching cost. This makes the results applicable to the broad range of products that are distinctly identified (i.e., branded) rather than just to products for which there is a product adoption cost or explicit switching fee. In the simulations, prices are as much as 18% lower with than without switching costs. More important, equilibrium prices do not increase even in the presence of switching costs that are of the same order of magnitude as product price..Printed journal

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Ketersediaan

Call Number	Location	Available
	PSB lt.dasar - Pascasarjana	1

Penerbit	American Marketing Association.,
Edisi	-
Subjek	Competition Economic models Equilibrium Customer Retention Product differentiation studies Packaged goods
ISBN/ISSN	222437
Klasifikasi	-
Deskripsi Fisik	-
Info Detail Spesifik	-
Other Version/Related	Tidak tersedia versi lain
Lampiran Berkas	Tidak Ada Data