Reimbursing Consumers' Switching Costs in Network and Nonnetwork Industries

被引:0
作者
Chen, Jiawei [1 ]
Sacks, Michael [2 ]
机构
[1] Univ Calif Irvine, Dept Econ, Irvine, CA 92697 USA
[2] Clarkson Univ, David D Reh Sch Business, Potsdam, NY USA
关键词
behavior-based price discrimination; network goods; reimbursement; switching costs; DYNAMIC PRICE-COMPETITION; MARKETS; BEHAVIOR; DISCRIMINATION; MODEL; EQUILIBRIUM; INERTIA; DUOPOLY; WELFARE; ENTRY;
D O I
10.1111/jems.12635
中图分类号
F [经济];
学科分类号
02 ;
摘要
To analyze how firms' policies to reimburse consumer switching costs affect prices, market structure, and welfare, we develop a dynamic duopoly model with network effects, switching costs, and switching cost reimbursement. We find that each firm's reimbursement strategy is nonmonotonic in its installed base. While nonmonotonic, the firm with the greater installed base always reimburses more of the switching cost than its smaller competitor, allowing the firm that obtains an early advantage to dominate the market. Consumers benefit from the reimbursement, while producers only benefit in network industries when network effects are large; otherwise, the reimbursement induces a prisoner's dilemma.
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页数:27
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