Heterogeneous switching costs

• Autores: Gary Biglaiser, Jacques Crémer, Gergely Dobos
• Localización: International journal of industrial organization, ISSN 0167-7187, Vol. 47, Nº. 0, 2016, págs. 62-87
• Idioma: inglés
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• Resumen

  • Abstract We consider a two period model where consumers have different switching costs. Before the market opens an Incumbent sells to all consumers; after the market opens competitors appear. We identify the equilibrium both with Stackelberg and Bertrand competition and show how the presence of low switching cost consumers benefits the Incumbent, despite the fact that it never sells to any of them. Furthermore, we identify a free rider effect among consumers.