Switching Costs and Market Competitiveness : Deconstructing the Relationship

@inproceedings{Shin2008SwitchingCA,
  title={Switching Costs and Market Competitiveness : Deconstructing the Relationship},
  author={Jiwoong Shin and K. Sudhir},
  year={2008}
}
The conventional wisdom is that switching costs raise prices and make markets less competitive. Dube, Hitsch and Rossi (2009, hereafter DHR) demonstrate a U shaped relationship between switching costs and equilibrium average prices; i.e., prices fall at low levels of switching costs and then rise as switching costs become very high. DHR show this result using a numerical solution of an infinite period game modeling stochastic consumer preferences with a logit demand model. The authors replicate… CONTINUE READING

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