Market Frictions: A Unified Model of Search and Switching Costs

@article{Wilson2009MarketFA,
  title={Market Frictions: A Unified Model of Search and Switching Costs},
  author={Chris M. Wilson},
  journal={Microeconomics: Welfare Economics \& Collective Decision-Making eJournal},
  year={2009}
}
  • Chris M. Wilson
  • Published 1 February 2009
  • Economics
  • Microeconomics: Welfare Economics & Collective Decision-Making eJournal
Despite the existence of two vast literatures, very little is known about the potential differences or interactions between search and switching costs. This paper demonstrates the benefits of examining the two frictions in unison. First, the paper shows how subtle distinctions between the two costs can provide important differences in their effects upon consumer behaviour and market prices. In many cases, policymakers may prefer to reduce search costs rather than switching costs. Second, the… 
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References

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This paper studies consumer search and pricing behavior in the British domestic electricity market following its opening to competition in 1999. We develop a sequential search model in which an
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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
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