Why and how should innovative industries with high consumers' 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 and to discuss the movement of deregulation implemented since the early 2000s in France, as well as the apparent emerging potential of re-regulation. We argue the presence of a cost to consumers to switch between 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. We provide a measure of the cost to switch from ADSL to cable for retail consumers in France which supports the domination of the former technology. 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.
|Date of creation:||2009|
|Date of revision:|
|Publication status:||Published, Regulation, Deregulation, Reregulation: Institutional Perspectives, Edward Elgar (Ed.), 2009, 327-350|
|Note:||View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00239289/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
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.:
- Oliver E. Williamson, 2005. "The Economics of Governance," American Economic Review, American Economic Association, vol. 95(2), pages 1-18, May.
- 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, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
- 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," Competition Policy Center, Working Paper Series qt9n26k7v1, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Paul Klemperer & Joseph Farrell, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Economics Series Working Papers 2006-W07, University of Oxford, Department of Economics.
- 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.
- Joseph Farrell and Carl Shapiro., 1988.
"Dynamic Competition with Switching Costs,"
Economics Working Papers
8865, University of California at Berkeley.
- 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.
- 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.
- Beggs, Alan, 1989. "A Note on Switching Costs and Technology Choice," Journal of Industrial Economics, Wiley Blackwell, vol. 37(4), pages 437-40, June.
- Gans, Joshua S, 2001. "Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities," Journal of Regulatory Economics, Springer, vol. 20(2), pages 167-89, September.
- Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
- Shelanski, Howard A., 2005. "Inter-Modal Competition and Telecommunications Policy in the United States," MPRA Paper 2513, University Library of Munich, Germany.
- Morgenstern, Richard & Harrington, Winston & Nelson, Per-Kristian, 1999. "On the Accuracy of Regulatory Cost Estimates," Discussion Papers dp-99-18, Resources For the Future.
- repec:cup:cbooks:9780521016919 is not listed on IDEAS
- 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.
- Green, Richard, 2000. "Can Competition Replace Regulation for Small Utility Customers?," CEPR Discussion Papers 2406, C.E.P.R. Discussion Papers.
- Alleman, James & Rappoport, Paul, 2005. "Regulatory Failure: Time for a New Policy Paradigm," MPRA Paper 2517, University Library of Munich, Germany.
- 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.
- 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.
- 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.
- von Weizsacker, C Christian, 1984. "The Costs of Substitution," Econometrica, Econometric Society, vol. 52(5), pages 1085-1116, September.
- 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.
- 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.
- 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.
- repec:cup:cbooks:9780521816632 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00239289. 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: (CCSD)
If references are entirely missing, you can add them using this form.