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The role of consumers in competition and competition policy

  • Waterson, Michael

This paper develops the idea that consumers’ behavior matters significantly from the viewpoint of industry performance. This is examined through some theoretical propositions, but then at greater length by means of some case study examples. These examples demonstrate how, even in potentially competitive industries, reluctance on the part of consumers to search or to switch suppliers can lead to a sub-competitive outcome. The significance of non-traditional competition policy remedies in changing the outcome is drawn out.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp607.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 607.

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Length: 26 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:wrk:warwec:607
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/
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  1. John G. Lynch , Jr. & Dan Ariely, 2000. "Wine Online: Search Costs Affect Competition on Price, Quality, and Distribution," Marketing Science, INFORMS, vol. 19(1), pages 83-103, April.
  2. Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 493-510, October.
  3. 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.
  4. Simon P. Anderson & Régis Renault, 2002. "Advertising Content," Virginia Economics Online Papers 362, University of Virginia, Department of Economics.
  5. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  6. Albaek, Svend & Mollgaard, Peter & Overgaard, Per B, 1997. "Government-Assisted Oligopoly Coordination? A Concrete Case," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 429-43, December.
  7. Waterson, Michael, 2003. "Consumers and Competition," The Warwick Economics Research Paper Series (TWERPS) 679, University of Warwick, Department of Economics.
  8. Moshkin, N. & Shachar, R., 2000. "Switching Costs or Search Costs?," Papers 3-2000, Tel Aviv.
  9. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  10. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
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