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Welfare effects of switching barriers through permanence clauses: Evidence from the mobiles market in Colombia

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  • Serna, Natalia
  • Riascos, Álvaro J.
  • Martin, Juan David

Abstract

•We measure the welfare effects of switching costs through permanence clauses in the mobiles market in Colombia (2014-2016).•We find that fixed-length terms in telecommunications contracts are associated to higher markups in the mobile terminal.•Permanence clauses generate significant switching costs that derive in lower consumer surplus during the period of analysis.•Firm surplus increased due to the elimination of permanence clauses. The variation was perceived mostly by retail sales firms.•We find that in the absence of permanence clauses, consumers would substitute away from prepay to postpay plans.

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  • Serna, Natalia & Riascos, Álvaro J. & Martin, Juan David, 2019. "Welfare effects of switching barriers through permanence clauses: Evidence from the mobiles market in Colombia," Telecommunications Policy, Elsevier, vol. 43(4), pages 310-323.
    • Handle: RePEc:eee:telpol:v:43:y:2019:i:4:p:310-323
    DOI: 10.1016/j.telpol.2018.09.006
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    More about this item

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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