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Dynamic Competition with Switching Costs
Open accessAbstract
We analyze an overlapping-generations model of duopolistic competition in the presence of consumer switching costs. Competition for established buyers is continually intermingled with competition for new, uncommitted buyers. In equilibrium the firm with attached customers typically specializes in serving them and concedes new buyers to its rival. This pattern of repeated entry persists even when there are economies of scale or network externalities. Switching costs thus can cause inefficiency in a surprising way: far from forming an entry barrier, they encourage entry to serve new customers, even when such entry is inefficient.
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Citations
Cited by
Systems Competition and Network Effects
Katz, M. L., & Shapiro, C. (1994) · Journal of Economic Perspectives · doi:10.1257/jep.8.2.93 · Cited by 2,646
Self-citationConsumer Switching Costs: A Typology, Antecedents, and Consequences
Burnham, T. A., Frels, J. K., & Mahajan, V. (2003) · Journal of the Academy of Marketing Science · doi:10.1177/0092070302250897 · Cited by 1,858
Capital Market Imperfections and Countercyclical Markups: Theory and Evidence
Chevalier, J., & Scharfstein, D. (1994) · National Bureau of Economic Research · doi:10.3386/w4614 · Cited by 271
Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange
Ericson, K. M. M. (2014) · American Economic Journal: Economic Policy · doi:10.1257/pol.6.1.38 · Cited by 183
Standards in green public procurement – A framework to enhance innovation
Rainville, A. (2017) · Journal of Cleaner Production · doi:10.1016/j.jclepro.2016.10.088 · Cited by 159
Metadata
- Authors
- Farrell, J., & Shapiro, C.
- Venue
- The RAND Journal of Economics
- Publisher
- Wiley
- Published
- 1988
- Volume
- 19
- Issue
- 1
- Pages
- 123
- ISSN
- 0741-6261 (ISSN-L)
- OpenAlex
- W2154047954
- Cited by
- 523
- References
- 0
- FWCI
- 25.41
- Type
- journal article
- Language
- en
- Open access
- green
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
