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.
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.:
- 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.
- 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.
- 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.
- 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.
- Suleymanova, Irina & Wey, Christian, 2011. "Bertrand competition in markets with network effects and switching costs," DICE Discussion Papers 30, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- 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.
- Ulrich Doraszelski & Sarit Markovich, 2007. "Advertising dynamics and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 557-592, 09.
- Shy,Oz, 2001.
"The Economics of Network Industries,"
Cambridge University Press, number 9780521800952, 1.
- Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2009.
"Avoiding market dominance: product compatibility in markets with network effects,"
RAND Journal of Economics,
RAND Corporation, vol. 40(3), pages 455-485.
- Ulrich Doraszelski & Joe Harrington & Jiawei Chen, 2009. "Avoiding Market Dominance: Product Compatibility in Markets with Network Effects," 2009 Meeting Papers 30, Society for Economic Dynamics.
- Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2008. "Avoiding Market Dominance: Product Compatibility in Markets with Network Effects," Economics Working Paper Archive 537, The Johns Hopkins University,Department of Economics.
- Kenneth Train, 2003.
"Discrete Choice Methods with Simulation,"
Online economics textbooks,
SUNY-Oswego, Department of Economics, number emetr2.
- 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.
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.