Managing Switching Costs in Multiperiod Procurements with Strategic Buyers
AbstractThis paper examines the use of switching costs by long lived strategic buyers to manage dynamic competition between rival suppliers. The analysis reveals how buyers may employ switching costs to their advantage. We show, ironically, when switching costs are high a buyer may induce suppliers to price more competitively by credibly threatening to replace the incumbent supplier with his rivals. The implication of these findings for adoption of technology and firm organization are explored in setting where buyers are integrated with their suppliers and where the buyer is an outsourcer.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 03-04.
Date of creation: 2003
Date of revision:
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Other versions of this item:
- Tracy R. Lewis & Huseyin Yildirim, 2005. "Managing Switching Costs In Multiperiod Procurements With Strategic Buyers ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1233-1269, November.
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-19 (All new papers)
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- Besanko, David & Doraszelski, Ulrich & Kryukov, Yaroslav & Satterthwaite, Mark, 2007.
"Learning-by-Doing, Organizational Forgetting and Industry Dynamics,"
CEPR Discussion Papers
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- David Besanko & Ulrich Doraszelski & Yaroslav Kryukov & Mark Satterthwaite, 2007. "Learning-by-Doing, Organizational Forgetting, and Industry Dynamics," Levine's Bibliography 321307000000000903, UCLA Department of Economics.
- David Besanko & Ulrich Doraszelski, 2005. "Learning-by-Doing, Organizational Forgetting, and Industry Dynanmics," Computing in Economics and Finance 2005 236, Society for Computational Economics.
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