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} }
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…
13 Citations
Estimation of Search Frictions in the British Electricity Market
- Economics
- 2010
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…
Information matters: A theoretical comparison of some cross-border trade barriers
- EconomicsInf. Econ. Policy
- 2016
Can a Decline in Search Cost Increase Prices?
- Business, Economics
- 2015
This paper provides a new explanation of why a decline in consumers price search cost may not lead to lower prices. In a duopoly with price competition, I show that when some consumers are captive to…
Information Matters: A Theoretical Comparison of Some Cross-Border Trade Barriers
- Economics
- 2016
There is widespread evidence that geographical borders reduce trade. This paper presents a theoretical model capable of providing a succinct comparison of three broad forms of trade barriers…
Quantifying Search and Switching Costs in the U.S. Auto Insurance Industry
- Economics, Business
- 2014
type="main"> I estimate demand for auto insurance in the presence of two types of market frictions: search and switching costs. I develop an integrated utility-maximizing model in which consumers…
Information Matters: Comparing Some Theoretical Determinants of Border Effects in Trade
- Economics
- 2015
There is widespread evidence that geographical borders reduce trade volumes. This paper presents a theoretical model capable of providing a succinct comparison of three broad explanations for this…
Essays in industrial organisation
- Business, Economics
- 2010
This thesis presents four largely independent essays on industrial organisation. The first three essays examine how search and switching costs distort competitive markets, whilst the fourth essay…
An Empirical Study of the Effect of the Internet on Fares in the U.S. Airline Industry.
- Business
- 2015
A reduction in search costs is generally believed to make markets more competitive. However, the effect may be mitigated or amplified if consumers must pay costs for switching products. This paper…
Essays on the Microfoundations of Competition and Choice in Public Service Delivery
- Economics, Political Science
- 2015
markdownabstract__Abstract__
The way how public services are delivered has changed fundamentally in past
decades. While in the 1970s most public services such as energy, water or telecommunications…
References
SHOWING 1-10 OF 64 REFERENCES
Estimation of Search Frictions in the British Electricity Market
- Economics
- 2010
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…
Do Switching Costs Make Markets Less Competitive?
- Economics, Business
- 2006
The conventional wisdom in economic theory holds that switching costs make markets less competitive. This article challenges this claim. The authors formulate an empirically realistic model of…
Interstate Long Distance Rates: Search Costs, Switching Costs, and Market Power
- Business
- 1997
A number of authors have argued that the divestiture of AT & T did not reduce the rates of long distance telephone companies as often believed. However, the literature has offered few explanations as…
Switching costs, experience goods and dynamic price competition
- Economics
- 2010
I analyze a dynamic duopoly with an infinite horizon where consumers are uncertain about their potential satisfaction from the products and face switching costs. I derive sufficient conditions for…
Information, Search, and Price Dispersion
- Economics
- 2006
We provide a unified treatment of alternative models of information acquisition/transmission that have been advanced to rationalize price dispersion in online and offline markets for homogeneous…
Prominence and Consumer Search
- Economics, Business
- 2009
This paper examines the implications of "prominence" in search markets. We model prominence by supposing that the prominent firm will be sampled first by all consumers. If there are no systematic…
Pricing, product diversity, and search costs: a Bertrand-Chamberlin-Diamond model
- Economics
- 1999
We study price competition in the presence of search costs and product differentiation. The limit cases of the model are the ‘‘Bertrand Paradox,’’ the ‘‘Diamond Paradox,’’ and Chamberlinian…
Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade
- Business, Economics
- 1992
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…