Market Frictions: A Unified Model of Search Costs and Switching Costs

Chris Wilson
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Chris Wilson: Loughborough University

No 2009-03, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: It is well known that search costs and switching costs can create market power by constraining the ability of consumers to change suppliers. While previous research has examined each cost in isolation, this paper demonstrates the benefits of examining the two types of friction in unison. The paper shows how subtle distinctions between the two costs can provide important differences in their effects upon consumer behaviour, competition and welfare. In addition, the paper also illustrates a simple empirical methodology for estimating separate measures of both costs, while demonstrating a potential bias that can arise if only one cost is considered.

Date: 2009-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2009_03

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