Market Frictions: A Unified Model of Search and Switching Costs
AbstractDespite the existence of two vast literatures, very little is known about the potential differences or interactions between search and switching costs. This paper demonstrates the benefits of examining the two frictions in unison. First, the paper shows how subtle distinctions between the two costs can provide important differences in their effects upon consumer behaviour and market prices. In many cases, policymakers may prefer to reduce search costs rather than switching costs. Second, the paper illustrates a simple methodology for estimating the magnitude of both costs while demonstrating the potential bias that can arise from a single-cost approach.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 13672.
Date of creation: Feb 2009
Date of revision:
Search costs; Switching Costs; Market Friction;
Find related papers by JEL classification:
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-07 (All new papers)
- NEP-CBE-2009-03-07 (Cognitive & Behavioural Economics)
- NEP-LAB-2009-03-07 (Labour Economics)
- NEP-MIC-2009-03-07 (Microeconomics)
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