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Enhancing market power by reducing switching costs

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  • Bouckaert, Jan
  • Degryse, Hans
  • Provoost, Thomas

Abstract

A proportional decrease in switching costs increases competition and social welfare. However, a lump-sum decrease in switching costs softens competition and does not invariably increase social welfare.

Suggested Citation

  • Bouckaert, Jan & Degryse, Hans & Provoost, Thomas, 2010. "Enhancing market power by reducing switching costs," Economics Letters, Elsevier, vol. 109(2), pages 131-133, November.
    • Handle: RePEc:eee:ecolet:v:109:y:2010:i:2:p:131-133
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    References listed on IDEAS

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    1. Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
    2. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 515-539.
    3. Garcia Marinoso, Begona, 2001. "Technological Incompatibility, Endogenous Switching Costs and Lock-In," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 281-298, September.
    4. Buehler, Stefan & Dewenter, Ralf & Haucap, Justus, 2006. "Mobile number portability in Europe," Telecommunications Policy, Elsevier, vol. 30(7), pages 385-399, August.
    5. Stefan Buehler & Justus Haucap, 2004. "Mobile Number Portability," Journal of Industry, Competition and Trade, Springer, vol. 4(3), pages 223-238, September.
    6. Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
    7. Kim, Moshe & Kliger, Doron & Vale, Bent, 2003. "Estimating switching costs: the case of banking," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 25-56, January.
    8. Erland Nier & Celine Gondat-Larralde, 2004. "The Microeconomics Of Retail Banking - An Empirical Analysis Of The UK Market For Personal Current Accounts," Royal Economic Society Annual Conference 2004 110, Royal Economic Society.
    9. Fershtman, Chaim & Gandal, Neil, 1994. "Disadvantageous semicollusion," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 141-154, June.
    10. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
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    Citations

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    Cited by:

    1. Juan Pablo Atal & Hanming Fang & Martin Karlsson & Nicolas R. Ziebarth, 2019. "Exit, Voice, or Loyalty? An Investigation Into Mandated Portability of Front‐Loaded Private Health Plans," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(3), pages 697-727, September.
    2. Baah Kusi & Elikplimi Agbloyor & Agyapomaa Gyeke‐Dako & Simplice Asongu, 2022. "Financial sector transparency, financial crises and market power: A cross‐country evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4431-4450, October.
    3. Biglaiser, Gary & Crémer, Jacques & Dobos, Gergely, 2016. "Heterogeneous switching costs," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 62-87.
    4. Basaure, Arturo & Suomi, Henna & Hämmäinen, Heikki, 2014. "Effects of transaction and switching costs on mobile market performance," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106830, International Telecommunications Society (ITS).
    5. Mariana O. Silva & Claudio R. Lucinda, 2017. "Switching costs and the extent of potential competition in Brazilian banking," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 17(1), pages 117-128.
    6. Andrew Rhodes, 2014. "Re-examining the effects of switching costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(1), pages 161-194, September.
    7. Biglaiser, Gary & Crémer, Jacques & Dobos, Gergely, 2013. "Heterogenous switching costs," TSE Working Papers 13-451, Toulouse School of Economics (TSE), revised Oct 2015.
    8. Biglaiser, Gary & Crémer, Jacques & Dobos, Gergely, 2013. "The value of switching costs," Journal of Economic Theory, Elsevier, vol. 148(3), pages 935-952.
    9. Gary Biglaiser & Jacques Crémer & Gergely Dobos, 2014. "Heterogenous Switching Costs," CESifo Working Paper Series 4587, CESifo.
    10. Usero Sánchez, Belén & Asimakopoulos, Grigorios, 2012. "Regulation and competition in the European mobile communications industry: An examination of the implementation of mobile number portability," Telecommunications Policy, Elsevier, vol. 36(3), pages 187-196.
    11. Biglaiser, Gary & Crémer, Jacques & Dobos, Gergely, 2013. "Heterogenous switching costs," IDEI Working Papers 809, Institut d'Économie Industrielle (IDEI), Toulouse.

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    More about this item

    Keywords

    Price competition Switching costs;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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