Determinants of Price Comparison and Supplier Switching Rates in Selected Sectors

This study looks into the factors determining price comparisons and supplier switching as revealed by a representative survey of Austrian consumers. Price comparisons and supplier switching can be interpreted as a measure of the competitive pressure that consumers exert on enterprises. Thereby, they influence the intensity of competition in an industry, which in its turn, curbs inflation and boosts growth. The fundamental driver of switching is the comparison of prices. Those who compare prices not only consider price comparisons but also switching less cumbersome and, hence, switch suppliers more frequently. To a certain extent, search as well as switching costs are perceived to be higher than they actually are, i.e. persons inexperienced in searching and switching suppliers overestimate the difficulties involved. Price comparison behavior is determined by educational attainment (education levels above apprenticeships), gender and (urban or rural) residence. While Internet use is limited for price comparisons, it reduces the efforts required for comparing prices and switching suppliers to a highly significant extent in all sectors. Moreover, search and switching costs play a major role in explaining sectoral differences in price comparison behavior. Therefore, competition intensity could be increased through education reforms, the promotion of Internet usage, sector- specific reductions of search and switching costs as well as awareness-raising measures. The results can be used for further analyses in the field of competition, productivity and inflation.