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State Dependence at Internet Portals

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  • Avi Goldfarb

Abstract

"This study offers evidence of the existence of switching costs on the Internet. It uses more flexible methods than previously possible to separate switching costs from serially correlated unobservables at Internet portals. The data contain nearly 1,000 observations per household, allowing for household-specific regressions that control for all household-specific heterogeneity. The results show that households exhibit switching costs. The loyalty generated by these costs drives a large fraction of portal visits and generates considerable revenues; however, these revenues are not large enough to justify the losses incurred by Internet portals in the 1990s while building market share. The results also suggest that random coefficients models overestimate true state dependence." Copyright 2006, The Author(s) Journal Compilation (c) 2006 Blackwell Publishing.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 15 (2006)
Issue (Month): 2 (06)
Pages: 317-352

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Handle: RePEc:bla:jemstr:v:15:y:2006:i:2:p:317-352

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Cited by:
  1. Morten Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2008. "Incomplete Cost Pass-Through Under Deep Habits," Economics Working Papers ECO2008/06, European University Institute.
  2. Ribeiro, Ricardo, 2010. "Consumer demand for variety: intertemporal effects of consumption, product switching and pricing policies," MPRA Paper 25812, University Library of Munich, Germany.
  3. Gabor Kezdi & Gergely Csorba, 2011. "Estimating the Lock-in Effects of Switching Costs from Firm-Level Data," IEHAS Discussion Papers 1108, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. Carlos Ocaña Pérez de Tudela & Yolanda Polo & Francisco Javier Sesé, 2009. "Existencia y heterogeneidad de los costes de cambio en la industria de la Telefonía Móvil," Hacienda Pública Española, IEF, vol. 191(4), pages 9-26, December.
  5. Lukasz Grzybowski, 2008. "Estimating Switching Costs in Mobile Telephony in the UK," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 113-132, June.
  6. Hong, Seung-Hyun & Rezende, Leonardo, 2012. "Lock-in and unobserved preferences in server operating systems: A case of Linux vs. Windows," Journal of Econometrics, Elsevier, vol. 167(2), pages 494-503.
  7. Gábor Kézdi & Gergely Csorba, 2013. "Estimating Consumer Lock-In Effects from Firm-Level Data," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 431-452, September.
  8. Lukasz Grzybowski & Pedro Pereira, 2011. "Subscription Choices and Switching Costs in Mobile Telephony," Review of Industrial Organization, Springer, vol. 38(1), pages 23-42, January.
  9. Avi Goldfarb, 2006. "The medium-term effects of unavailability," Quantitative Marketing and Economics, Springer, vol. 4(2), pages 143-171, June.
  10. K. Sudhir & Nathan Yang, 2014. "Exploiting the Choice-Consumption Mismatch: A New Approach to Disentangle State Dependence and Heterogeneity," Cowles Foundation Discussion Papers 1941, Cowles Foundation for Research in Economics, Yale University.
  11. Avi Goldfarb, 2014. "What is Different About Online Advertising?," Review of Industrial Organization, Springer, vol. 44(2), pages 115-129, March.

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