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Supplier Surfing: Competition and Consumer Behavior in Subscription Markets

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Author Info
 Taylor, Curtis R

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Abstract

I explore the practice of offering subscribers enticements to switch suppliers. This type of competition is natural in subscription markets for homogeneous goods and services. Efficiency is impaired because subscribers are induced to expend resources changing suppliers. Subscription markets are fully competitive only when three or more firms serve the industry. In this case, the price offered to switchers is below cost, while nonswitchers pay a premium. Each firm earns rent on its customer base, but zero expected profit on each new subscriber it attracts. When firms can track switching behavior, consumers may change suppliers in order to establish reputations. Copyright 2003 by the RAND Corporation.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 34 (2003)
Issue (Month): 2 (Summer)
Pages: 223-46
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Handle: RePEc:rje:randje:v:34:y:2003:i:2:p:223-46

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  1. Timothy Cason & Daniel Friedman, 2002. "A Laboratory Study of Customer Markets," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 2(1), pages 1020-1020. [Downloadable!] (restricted)
  2. Julian Villanueva & Pradeep Bhardwaj & Sridhar Balasubramanian & Yuxin Chen, 2007. "Customer relationship management in competitive environments: The positive implications of a short-term focus," Quantitative Marketing and Economics, Springer, vol. 5(2), pages 99-129, June. [Downloadable!] (restricted)
  3. Solange Berstein & Alejandro Micco, 2002. "Turnover and Regulation: The Chilean Pension Fund Industry," Working Papers Central Bank of Chile 180, Central Bank of Chile. [Downloadable!]
  4. Asplund, Björn Marcus & Eriksson, Rickard & Strand, Niklas, 2002. "Price Discrimination in Oligopoly: Evidence from Swedish Newspapers," CEPR Discussion Papers 3269, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Thomas Gehrig & Rune Stenbacka, 2005. "Two at the Top: Quality Differentiation in Markets with Switching Costs," CIE Discussion Papers 2005-09, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
    Other versions:
  6. V. Viard, 2007. "Information Goods Upgrades: Theory and Evidence," Contributions to Theoretical Economics, Berkeley Electronic Press, vol. 7(1), pages 1126-1126. [Downloadable!] (restricted)
  7. Rosa Branca Esteves, 2007. "Customer Poaching and Advertising," NIPE Working Papers 12/2007, NIPE - Universidade do Minho. [Downloadable!]
  8. Curtis Taylor & Liad Wagman, 2008. "Who Benefits From Online Privacy?," Working Papers 08-26, NET Institute, revised Sep 2008. [Downloadable!]
  9. Rosa Branca Esteves, 2007. "Pricing with Customer Recognition," NIPE Working Papers 27/2007, NIPE - Universidade do Minho. [Downloadable!]
  10. Viard, V. Brian, 2005. "Do Switching Costs Make Markets More or Less Competitive? The Case of 800-Number Portability," Research Papers 1773r3, Stanford University, Graduate School of Business. [Downloadable!]
  11. Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, EconWPA. [Downloadable!]
  12. Yuncheol Jeong & Masayoshi Maruyama, 2008. "Strategic choice of price policy under exogenous switching costs," Economics Bulletin, Economics Bulletin, vol. 12(26), pages 1-8. [Downloadable!]
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