The value of switching costs

Biglaiser, Gary, Crémer, Jacques and Dobos, Gergely (2013) The value of switching costs. Journal of Economic Theory, vol. 148 (n° 3). pp. 935-952.

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Official URL: http://tse-fr.eu/pub/27432

Abstract

We study a dynamic model with an incumbent monopolist and entry in every subsequent period. We first show that if all consumers have the same switching cost, then the intertemporal profits of the incumbent are the same as if there was only one period. We then study the consequences of heterogeneity of switching costs. We prove that even low switching cost customers have value for the incumbent: when there are more of them its profits increase as their presence hinders entrants who find it more costly to attract high switching cost customers.

Item Type: Article
Language: English
Date: May 2013
Refereed: Yes
Uncontrolled Keywords: Switching cost, Dynamic competition, Incumbency, Entry
JEL codes: D43 - Oligopoly and Other Forms of Market Imperfection
L12 - Monopoly; Monopolization Strategies
L13 - Oligopoly and Other Imperfect Markets
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:37
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:27432
URI: http://publications.ut-capitole.fr/id/eprint/15691

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