Consumer state dependence, switching costs, and forward-looking producers. A dynamic discrete choice model applied to the diaper market

Dennis Rickert

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: This study estimates a dynamic discrete choice model to analyze the effect of switching costs on firm market power. Given the presence of switching costs for consumers in the market for disposable diapers, I show how firms apply dynamic strategies to a market for differentiated products and in a context of vertical retailer-manufacturer relationships. My findings support the existence of state dependence in consumer demand. Furthermore, I show that the firm profits would be higher in a counterfactual scenario of no switching costs.

JEL-codes: L10 L20 L60 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-com, nep-dcm and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145672

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