IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The value of switching costs

  • Biglaiser, Gary
  • Crémer, Jacques
  • Dobos, Gergely

We study a dynamic model with an incumbent monopolist and entry in every subsequent period. We first show that if all consumers have the same switching cost, then the intertemporal profits of the incumbent are the same as if there was only one period. We then study the consequences of heterogeneity of switching costs. We prove that even low switching cost customers have value for the incumbent: when there are more of them its profits increase as their presence hinders entrants who find it more costly to attract high switching cost customers.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://idei.fr/sites/default/files/medias/doc/by/cremer_j/value_oct2012.pdf
File Function: Forthcoming in "Journal of Economic Theory"
Download Restriction: no

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-142.

as
in new window

Length:
Date of creation: 03 Feb 2010
Date of revision: 30 Oct 2012
Publication status: Published in Journal of Economic Theory, vol. 148, n. 3, May 2013, p. 935-952.
Handle: RePEc:tse:wpaper:22323
Contact details of provider: Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/

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.:

as in new window
  1. Biglaiser, Gary & Crémer, Jacques & Dobos, Gergely, 2010. "The value of switching costs," TSE Working Papers 10-142, Toulouse School of Economics (TSE), revised 30 Oct 2012.
  2. Jan Bouckaert & Hans Degryse & Thomas Provoost, 2008. "Enhancing Market Power by Reducing Switching Costs," CESifo Working Paper Series 2449, CESifo Group Munich.
  3. Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
  4. 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.
  5. Anderson, Eric T. & Kumar, Nanda & Rajiv, Surendra, 2004. "A comment on: "Revisiting dynamic duopoly with consumer switching costs"," Journal of Economic Theory, Elsevier, vol. 116(1), pages 177-186, May.
  6. Kim, Moshe & Kliger, Doron & Vale, Bent, 2003. "Estimating switching costs: the case of banking," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 25-56, January.
  7. Yuxin Chen & Jinhong Xie, 2007. "Cross-Market Network Effect with Asymmetric Customer Loyalty: Implications for Competitive Advantage," Marketing Science, INFORMS, vol. 26(1), pages 52-66, 01-02.
  8. Gary Biglaiser & Jacques Crémer, 2011. "Equilibria in an infinite horizon game with an incumbent, entry and switching costs," International Journal of Economic Theory, The International Society for Economic Theory, vol. 7(1), pages 65-75, 03.
  9. 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.
  10. Klemperer, Paul D, 1987. "Entry Deterrence in Markets with Consumer Switching Costs," Economic Journal, Royal Economic Society, vol. 97(388a), pages 99-117, Supplemen.
  11. Taylor, Curtis R, 2003. " Supplier Surfing: Competition and Consumer Behavior in Subscription Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 223-46, Summer.
  12. Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 375-394.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:22323. 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: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.