Switch on the competition; causes, consequences and policy implications of consumer switching costs

Marc Pomp, Victoria Shestalova and Luiz Rangel

No 97, CPB Document from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: The success or failure of reforms aimed at liberalising markets depends to an important degree on consumer behaviour. If consumers do not base their choices on differences in prices and quality, competition between firms may be weak and the benefits of liberalisation to consumers may be small. One possible reason why consumers may respond only weakly to differences in price and quality is high costs of switching to another firm.This report presents a framework for analysing markets with switching costs and applies the framework in two empirical case studies. The first case study analyses the residential energy market, the second focuses on the market for social health insurance. In both markets, there are indications that switching costs are substantial. The report discusses policy options for reducing switching costs and for alleviating the consequences of switching costs.

JEL-codes: D12 L13 (search for similar items in EconPapers)
Date: 2005-09
New Economics Papers: this item is included in nep-com, nep-cse, nep-dcm, nep-ene, nep-ias, nep-mic and nep-mkt
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:cpb:docmnt:97

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