Switching Costs and Dynamic Price Competition in Network Industries
Motivated by policy makers' recent interest in reducing switching costs in various network industries to increase competition, this paper investigates how switching costs affect market outcome in such industries. The results show that the effects of switching costs on market concentration and prices critically depend on two factors: the strength of network effects and the quality of the outside good. For example, switching costs lower prices if network effects are modest and the outside good is attractive, but raise prices otherwise. Therefore, policy makers need to carefully evaluate those two factors in order to make informed decisions.
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.:
- Suleymanova Irina & Wey Christian, 2011.
"Bertrand Competition in Markets with Network Effects and Switching Costs,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 11(1), pages 1-58, September.
- Irina Suleymanova & Christian Wey, 2008. "Bertrand Competition in Markets with Network Effects and Switching Costs," Discussion Papers of DIW Berlin 796, DIW Berlin, German Institute for Economic Research.
- Suleymanova, Irina & Wey, Christian, 2011. "Bertrand competition in markets with network effects and switching costs," DICE Discussion Papers 30, Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf.
- Train,Kenneth E., 2009.
"Discrete Choice Methods with Simulation,"
Cambridge University Press, number 9780521766555, June.
- Shy,Oz, 2001.
"The Economics of Network Industries,"
Cambridge University Press, number 9780521800952, June.
- Viard, V. Brian, 2005.
"Do Switching Costs Make Markets More or Less Competitive? The Case of 800-Number Portability,"
1773r3, Stanford University, Graduate School of Business.
- V. Brian Viard, 2007. "Do switching costs make markets more or less competitive? The case of 800-number portability," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 146-163, 03.
- Minjung Park, 2005.
"The Economic Impact of Wireless Number Portability,"
04-017, Stanford Institute for Economic Policy Research.
- Minjung Park, 2011. "The Economic Impact of Wireless Number Portability," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 714-745, December.
- Doganoglu Toker & Grzybowski Lukasz, 2013. "Dynamic Duopoly Competition with Switching Costs and Network Externalities," Review of Network Economics, De Gruyter, vol. 12(1), pages 1-25, March.
- Ulrich Doraszelski & Sarit Markovich, 2007. "Advertising dynamics and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 557-592, 09.
- Matthew T. Clements & Hiroshi Ohashi, 2004.
"Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002,"
04-01, NET Institute, revised Oct 2004.
- Matthew T. Clements & Hiroshi Ohashi, 2004. "Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002," CIRJE F-Series CIRJE-F-261, CIRJE, Faculty of Economics, University of Tokyo.
When requesting a correction, please mention this item's handle: RePEc:net:wpaper:0925. 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: (Nicholas Economides)
If references are entirely missing, you can add them using this form.