The role of consumers in competition and competition policy

This paper develops the idea that consumers' behaviour matters significantly from the viewpoint of industry performance. This is examined through some theoretical propositions on search and switching behaviour, but then at greater length through some case study examples. These demonstrate how, even in potentially competitive industries, reluctance by consumers to search or to switch suppliers can lead to sub-competitive outcomes. Comparisons are made between industries where search and switching is easy and those where it is not. The significance of non-traditional competition policy remedies such as enforcement of annual contracts in changing the outcome is drawn out. (C) 2002 Elsevier Science B.V. All rights reserved.