Spatial models of heterogeneous switching costs

Paolo Siciliani and Walter Beckert ()

No 689, Bank of England working papers from Bank of England

Abstract: The presence of sticky, often labelled ‘unengaged’, consumers is arguably one of the most intractable issues faced by competition regulators, in that it entrenches incumbency advantage. We develop a spatial linear model of heterogeneous switching costs that allows for asymmetric distributions of heterogeneous switching costs. We not only model uniform pricing and history-based price discrimination, but also the impact of regulatory intervention aimed at making it easier for customers to be upgraded to a better tariff from their current service provider, something we call ‘leakage’. Finally, we analyse firms’ incentive to adopt history-based price discrimination and voluntarily permit ‘leakage’.

Keywords: Switching costs; unengaged ‘sticky’ customers; spatial linear model; uniform pricing; history-based price discrimination; ‘leakage’ (search for similar items in EconPapers)
JEL-codes: D43 L11 L44 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2017-11-03
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0689

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