Switching Costs in Two-sided Markets

Lam, Wing Man Wynne (2014) Switching Costs in Two-sided Markets. TSE Working Paper, n. 14-517

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Official URL: http://tse-fr.eu/pub/28398

Abstract

This paper studies a dynamic two-sided market in which consumers face switching costs between competing products. I first show that, in a symmetric equilibrium, switching costs lower the first-period price if network externalities are strong. By contrast, switching costs soften price competition in the initial period if network externalities are weak and consumers are more patient than the platforms. Second, an increase in switching costs on one side decreases the first-period price on the other side. Finally, consumer heterogeneity such as the presence of more loyal and naive customers on one side intensifies first-period competition on this side but softens first-period competition on the other side.

Item Type: Monograph (Working Paper)
Language: English
Date: August 2014
Uncontrolled Keywords: switching costs, two-sided markets, network externality, naivety, loyalty
JEL codes: D4 - Market Structure and Pricing
L1 - Market Structure, Firm Strategy, and Market Performance
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Mar 2015 14:49
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:28398
URI: http://publications.ut-capitole.fr/id/eprint/16551

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