Dynamic Pricing in Customer Markets with Switching Costs

Luis Cabral

Review of Economic Dynamics, 2016, vol. 20, 43-62

Abstract: In a dynamic competitive environment, switching costs have two effects. First, they increase the market power of a seller with locked-in customers. Second, they increase competition for new customers. I provide conditions under which switching costs decrease or increase equilibrium prices. Taken together, the results suggest that, if markets are very competitive to begin with, then switching costs make them even more competitive; whereas if markets are not very competitive to begin with, then switching costs make them even less competitive. In the above statements, by "competitive" I mean a market that is close to a symmetric duopoly or one where sales take place with high frequency. (Copyright: Elsevier)

Keywords: Switching costs; Dynamic pricing; Customer markets (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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DOI: 10.1016/j.red.2015.09.002

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