How do Switching Costs A¤ect Market Concentration and Prices in Network Industries?
نویسنده
چکیده
I investigate the e¤ects of switching costs on the market outcome in network industries using a dynamic duopoly model of price competition in the presence of an outside option. I nd that the role of switching costs depends on network e¤ects and the outside option. Without a viable outside option, high switching costs can neutralize the tendency towards high market concentration associated with network e¤ects, but with a viable outside option, switching costs increase market concentration. Furthermore, switching costs lower prices if network e¤ects are modest and there exists a viable outside option, but generally raise prices otherwise.
منابع مشابه
How do Switching Costs Affect Market Concentration and Prices in Network Industries?
Switching costs are prevalent in network industries, and this paper investigates their effects on market outcome. I find that the role of switching costs depends on network effects and the outside option. Without a viable outside option, high switching costs can neutralize the tendency towards market dominance associated with network effects, but with a viable outside option, switching costs fa...
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