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The Competitiveness of Markets with Switching Costs

Klemperer, Paul·1987·The RAND Journal of Economics

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.

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Metadata

Authors
Klemperer, P.
Venue
The RAND Journal of Economics
Publisher
Wiley
Published
1987
Volume
18
Issue
1
Pages
138
ISSN
0741-6261 (ISSN-L)
OpenAlex
W2152108833
Cited by
712
References
0
FWCI
13.91
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: The Competitiveness of Markets with Switching Costs. https://app.cochat.ai/papers/10.2307/2555540
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Klemperer, P. (1987). The Competitiveness of Markets with Switching Costs. The RAND Journal of Economics. https://doi.org/10.2307/2555540

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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.

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.