Why and how should innovative industries with high consumer switching costs be re-regulated?
The existence of costs to consumers to switch between products is central to the process by which firms set prices. Their effect on the introduction and diffusion of innovative technologies is not by now well understood, however. This paper aims to study this effect based on evidence in the broadband Internet industry. We discuss the movement of deregulation implemented since the early 2000s in France and the potential impact consumer switching costs may have had on it. We argue the existence of a cost to consumers to switch between connexion technologies may impede the expected beneficial outcomes of self-regulation through competition in liberalised innovative industries as it has been implemented so far in several countries. This is illustrated by providing a discussion of the low penetration rate of cable in France possibly due to the high cost to retail consumers to switch their DSL modems which, in returns supports the domination of this latter. These results suggest that retail broadband Internet markets may need some sort of re-regulation, including new principles for competition policy, to avoid the unwanted effects of consumer switching costs.
(This abstract was borrowed from another version of this item.)
|Date of creation:||2008|
|Contact details of provider:|| Postal: 69, quai d'Orsay - 75007 PARIS|
Phone: 01 44 18 54 00
Fax: 01 45 56 06 15
Web page: http://www.ofce.sciences-po.fr/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph Farrell & Carl Shapiro, 1988.
"Dynamic Competition with Switching Costs,"
RAND Journal of Economics,
The RAND Corporation, vol. 19(1), pages 123-137, Spring.
- Farrell, Joseph & Shapiro, Carl, 1988. "Dynamic Competition with Switching Costs," Department of Economics, Working Paper Series qt1h02g9q4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Joseph Farrell and Carl Shapiro., 1988. "Dynamic Competition with Switching Costs," Economics Working Papers 8865, University of California at Berkeley.
- Green, Richard, 2000. "Can Competition Replace Regulation for Small Utility Customers?," CEPR Discussion Papers 2406, C.E.P.R. Discussion Papers.
- Ruth N. Bolton, 1998. "A Dynamic Model of the Duration of the Customer's Relationship with a Continuous Service Provider: The Role of Satisfaction," Marketing Science, INFORMS, vol. 17(1), pages 45-65.
- Beggs, Alan, 1989. "A Note on Switching Costs and Technology Choice," Journal of Industrial Economics, Wiley Blackwell, vol. 37(4), pages 437-440, June.
- John J. Wallis & Douglass North, 1986. "Measuring the Transaction Sector in the American Economy, 1870-1970," NBER Chapters, in: Long-Term Factors in American Economic Growth, pages 95-162 National Bureau of Economic Research, Inc.
- Farrell, Joseph & Klemperer, Paul, 2007.
"Coordination and Lock-In: Competition with Switching Costs and Network Effects,"
Handbook of Industrial Organization,
- Joseph Farrell & Paul Klemperer, 2006. "Co-ordination and Lock-in: Competition with Switching Costs and Network Effects," Economics Papers 2006-W07, Economics Group, Nuffield College, University of Oxford.
- Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," CEPR Discussion Papers 5798, C.E.P.R. Discussion Papers.
- Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Competition Policy Center, Working Paper Series qt9n26k7v1, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Shelanski, Howard A., 2005. "Inter-Modal Competition and Telecommunications Policy in the United States," MPRA Paper 2513, University Library of Munich, Germany.
- Papacharissi, Zizi & Zaks, Anna, 2006. "Is broadband the future? An analysis of broadband technology potential and diffusion," Telecommunications Policy, Elsevier, vol. 30(1), pages 64-75, February.
- Morgenstern, Richard & Harrington, Winston & Nelson, Per-Kristian, 1999. "On the Accuracy of Regulatory Cost Estimates," Discussion Papers dp-99-18, Resources For the Future.
- Oliver E. Williamson, 2005. "The Economics of Governance," American Economic Review, American Economic Association, vol. 95(2), pages 1-18, May.
- Robert W. Hahn, 1998. "Policy Watch: Government Analysis of the Benefits and Costs of Regulation," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 201-210, Fall.
- Heiko A. Gerlach, 2004. "Announcement, Entry, and Preemption When Consumers Have Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 184-202, Spring.
- Jackie Krafft & Evens Salies, 2006.
"The cost of switching Internet providers in the French broadband industry, or why ADSL has diffused faster than other innovative technologies,"
- Jackie Krafft & Evens Salies, 2006. "The cost of switching Internet providers in the French broadband industry, or why ADSL has diffused faster than other innovative technologies"," Documents de Travail de l'OFCE 2006-16, Observatoire Francais des Conjonctures Economiques (OFCE).
- Evens Salies & Jackie Krafft, 2006. "The cost of switching Internet providers in the French broadband industry, or why ADSL has diffused faster than other innovative technologies," Sciences Po publications n°2006-16, Sciences Po.
- von Weizsacker, C Christian, 1984. "The Costs of Substitution," Econometrica, Econometric Society, vol. 52(5), pages 1085-1116, September.
- Waterson, Michael, 2001.
"The role of consumers in competition and competition policy,"
The Warwick Economics Research Paper Series (TWERPS)
607, University of Warwick, Department of Economics.
- Waterson, Michael, 2003. "The role of consumers in competition and competition policy," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 129-150, February.
- Krafft, Jackie & Salies, Evens, 2008. "The diffusion of ADSL and costs of switching Internet providers in the broadband industry: Evidence from the French case," Research Policy, Elsevier, vol. 37(4), pages 706-719, May.
- Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
- Gans, Joshua S, 2001. "Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities," Journal of Regulatory Economics, Springer, vol. 20(2), pages 167-189, September.
- Preston R. Fee & Hugo M. Mialon & Michael A. Williams, 2004. "What Is a Barrier to Entry?," American Economic Review, American Economic Association, vol. 94(2), pages 461-465, May.
- Shy, Oz, 2002. "A quick-and-easy method for estimating switching costs," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 71-87, January.
- Motta,Massimo, 2004.
Cambridge University Press, number 9780521016919, December.
- Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring.
- Alleman, James & Rappoport, Paul, 2005. "Regulatory Failure: Time for a New Policy Paradigm," MPRA Paper 2517, University Library of Munich, Germany.
- Winston Harrington & Richard D. Morgenstern & Peter Nelson, 2000. "On the accuracy of regulatory cost estimates," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(2), pages 297-322.
When requesting a correction, please mention this item's handle: RePEc:fce:doctra:0813. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francesco Saraceno)
If references are entirely missing, you can add them using this form.