Managing Switching Costs in Multiperiod Procurements with Strategic Buyers

Tracy Lewis and Huseyin Yildirim

No 03-04, Working Papers from Duke University, Department of Economics

Abstract: This paper examines the use of switching costs by long lived strategic buyers to manage dynamic competition between rival suppliers. The analysis reveals how buyers may employ switching costs to their advantage. We show, ironically, when switching costs are high a buyer may induce suppliers to price more competitively by credibly threatening to replace the incumbent supplier with his rivals. The implication of these findings for adoption of technology and firm organization are explored in setting where buyers are integrated with their suppliers and where the buyer is an outsourcer.

JEL-codes: C73 D44 L21 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: MANAGING SWITCHING COSTS IN MULTIPERIOD PROCUREMENTS WITH STRATEGIC BUYERS * (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:duk:dukeec:03-04

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