Consumer Switching Costs and Private Information
AbstractWe consider a standard model of consumer switching costs with demand uncertainty where firms observe private information about demand. Given this private information, each firm forms beliefs over different demand realizations as well as beliefs over the other firm's information. The main result here is that in the first period, if firms observe information suggesting that future demand is likely to be high, they will price aggressively, sacrificing current profits for higher market share and the expectation of higher future profits.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 9902001.
Date of creation: 13 Feb 1999
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consumer switching costs; oligopoly theory; private information;
Other versions of this item:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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