Heterogenous Switching Costs
31 Pages Posted: 2 Jun 2014
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Heterogenous Switching Costs
Date Written: February 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: D43, L13
Suggested Citation: Suggested Citation
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Heterogenous Switching Costs
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