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Switch on the competition; causes, consequences and policy implications of consumer switching costs


  • Marc Pomp


  • Victoria Shestalova


  • Luiz Rangel



The success or failure of reforms aimed at liberalising markets depends to an important degree on consumer behaviour. If consumers do not base their choices on differences in prices and quality, competition between firms may be weak and the benefits of liberalisation to consumers may be small. One possible reason why consumers may respond only weakly to differences in price and quality is high costs of switching to another firm. This report presents a framework for analysing markets with switching costs and applies the framework in two empirical case studies. The first case study analyses the residential energy market, the second focuses on the market for social health insurance. In both markets, there are indications that switching costs are substantial. The report discusses policy options for reducing switching costs and for alleviating the consequences of switching costs.

Suggested Citation

  • Marc Pomp & Victoria Shestalova & Luiz Rangel, 2005. "Switch on the competition; causes, consequences and policy implications of consumer switching costs," CPB Document 97, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:docmnt:97

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    References listed on IDEAS

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    Cited by:

    1. Michiel Bijlsma & Paul de Bijl & Viktoria Kocsis, 2009. "Concurrentie, innovatie en intellectuele eigendomsrechten in software markten," CPB Document 181, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Marc Pomp & Victoria Shestalova, 2007. "Switching Costs in Netherlands Energy Markets: Can Liberalisation Bring Benefits to Small Customers?," De Economist, Springer, vol. 155(3), pages 305-321, September.
    3. repec:oup:jcomle:v:12:y:2016:i:1:p:113-149. is not listed on IDEAS
    4. Alderighi, Marco, 2007. "The role of buying consortia among SMEs in the electricity market in Italy," Energy Policy, Elsevier, vol. 35(6), pages 3463-3472, June.
    5. Tim Burnett, 2014. "The Impact of Service Bundling on Consumer Switching Behaviour: Evidence from UK Communication Markets," The Centre for Market and Public Organisation 14/321, Department of Economics, University of Bristol, UK.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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