Heterogenous Switching Costs

28 Pages Posted: 5 Feb 2014

See all articles by Gary Biglaiser

Gary Biglaiser

University of North Carolina

Jacques Cremer

Toulouse School of Economics

Gergely Dobos

European Union - Directorate General for Competition

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Date Written: January 30, 2014

Abstract

We consider a simple two period model where consumers have different switching costs. Before the market opens, there was an incumbent who sold to all consumers. 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.

Keywords: switching cost

JEL Classification: D430, L130

Suggested Citation

Biglaiser, Gary and Cremer, Jacques and Dobos, Gergely, Heterogenous Switching Costs (January 30, 2014). CESifo Working Paper Series No. 4587, Available at SSRN: https://ssrn.com/abstract=2390630

Gary Biglaiser

University of North Carolina ( email )

Chapel Hill, NC 27599
United States
919-966-4884 (Phone)
919-966-4986 (Fax)

Jacques Cremer (Contact Author)

Toulouse School of Economics ( email )

1 Esplanade de l'Université
Toulouse Cedex 06, 31080
France

Gergely Dobos

European Union - Directorate General for Competition ( email )

Place Madou, Madouplein 1
Saint-Josse-ten-Noode/Sint-Joost-ten-Noode
Brussels, B-1049
Belgium

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