scholarly journals Dynamic Price Competition with Network Effects

2010 ◽  
Author(s):  
Luis Cabral
Keyword(s):  
Price Competition ◽  
Network Effects ◽  
Dynamic Price

scholarly journals Do Switching Costs Make Markets Less Competitive?

2009 ◽  
Vol 46 (4) ◽  
pp. 435-445 ◽  
Author(s):  
Jean-Pierre Dubé ◽  
Günter J. Hitsch ◽  
Peter E. Rossi
Keyword(s):  
Price Competition ◽  
Switching Costs ◽  
Realistic Model ◽  
Differentiated Products ◽  
Product Price ◽  
Equilibrium Prices ◽  
Dynamic Price ◽  
Packaged Goods ◽  
Order Of Magnitude ◽  
Lock In

The conventional wisdom in economic theory holds that switching costs make markets less competitive. This article challenges this claim. The authors formulate an empirically realistic model of dynamic price competition that allows for differentiated products and imperfect lock-in. They calibrate this model with data from frequently purchased packaged goods markets. These data are ideal in the sense that they have the necessary variation to identify switching costs separately from consumer heterogeneity. Equally important, consumers exhibit inertia in their brand choices, a form of psychological switching cost. This makes the results applicable to the broad range of products that are distinctly identified (i.e., branded) rather than just to products for which there is a product adoption cost or explicit switching fee. In the simulations, prices are as much as 18% lower with than without switching costs. More important, equilibrium prices do not increase even in the presence of switching costs that are of the same order of magnitude as product price.

scholarly journals Dynamic price competition

2006 ◽  
Vol 127 (1) ◽  
pp. 232-263 ◽  
Author(s):  
Dirk Bergemann ◽  
Juuso Välimäki
Keyword(s):  
Price Competition ◽  
Dynamic Price

scholarly journals Dynamic Price Competition with Fixed Capacities

2011 ◽  
Vol 57 (6) ◽  
pp. 1078-1093 ◽  
Author(s):  
Victor Martínez-de-Albéniz ◽  
Kalyan Talluri
Keyword(s):  
Price Competition ◽  
Dynamic Price
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