The Competitiveness of Markets with Switching Costs

Paul Klemperer

RAND Journal of Economics, 1987, vol. 18, issue 1, 138-150

Abstract: This article examines a two-period differentiated-products duopoly in which consumers are partially "locked in" by switching costs that they face in the second period. While these switching costs naturally make demand more inelastic in the second period, they also do so in the first period, because consumers recognize that a firm with a higher market share charges a higher price in the second period and hence is a less attractive supplier to which to be attached. Prices are lower in the first period than subsequently, because firms compete for market share that is valuable later. But prices may be higher in both periods than they would be in a market without switching costs.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (255)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819872 ... O%3B2-6&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:18:y:1987:i:spring:p:138-150

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().