Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade

@article{Klemperer1992CompetitionWC,
  title={Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade},
  author={Paul Klemperer},
  journal={The Review of Economic Studies},
  year={1992},
  volume={62},
  pages={515-539}
}
  • P. Klemperer
  • Published 1 July 1992
  • Business, Economics
  • The Review of Economic Studies
We survey recent work on competition in markets in which consumers have costs of switching between competing firms' products. In a market with switching costs (or "brand loyalty"), a firm's current market share is an important determinant of its future profitability. We examine how the firm's choice between setting a low price to capture market share, and setting a high price to harvest profits by exploiting its current locked-in customers, is affected by the threat of new entry, interest rates… 
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References

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Mixed Pricing In Oligopoly With Consumer Switching Costs
Price Wars Caused by Switching Costs
In many markets consumers have "switching costs", for example learning costs or transaction costs, of changing between functionally equivalent brands of a product, or of using any brand for the first…
Markets with consumer switching costs
Ex ante homogeneous products may, after the purchase of one of them, be ex post differentiated by switching costs including learning costs, transaction costs, or "artificial" costs imposed by firms,…
The Competitiveness of Markets with Switching Costs
This article examines a two-period differentiated-products duopoly in which consumers are partially "locked in" by switching costs that they face in the second period. While these switching costs…
Multi-Period Competition with Switching Costs
The authors analyze the evolution of duopolists' prices and market shares in an infinite-period market with consumer switching costs in which in every period new consumers arrive and a fraction of…
Sales and Consumer Lock-In
This paper examines the dynamically consistent price path for a new product monopolist, unable to commit to future prices, when consumers must incur setup costs of adopting the product. The authors…
Sequential Entry with Brand Loyalty Caused by Consumer Learning-by-Using
The authors examine first mover advantages in a new product market with sequential entry. Effort is necessary to learn how to use new products and consumers are assumed to differ in their ability to…
Two Kinds of Consumer Switching Costs
In this article, I introduce a distinction between two kinds of consumer switching costs: "transaction costs" and "learning costs." While transaction costs are incurred by a consumer at every switch…
Pricing in a Customer Market
In standard pricing models, movements in demand are partially offset by price responses. In a customer market, however, price markups may decrease with high demand. Thus, price may magnify, rather…
Entry Deterrence in Markets with Consumer Switching Costs
In many markets consumers have transaction or learning "switching costs" between functionally undifferentiated brands. New entry into such markets may be deterred either by large customer bases…
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