Pay to switch or pay to stay: Preference-based price discrimination in markets with switching costs

Shaffer, Greg and John Zhang, Z (2000) Pay to switch or pay to stay: Preference-based price discrimination in markets with switching costs. Journal of Economics and Management Strategy, 9 (3). pp. 397-424. ISSN 1530-9134

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Abstract

In many markets, firms can price discriminate between their own customers and their rivals' customers, charging one price to consumers who prefer their own product and another price to consumers who prefer a rival's product. We find that when demand is symmetric, charging a lower price to a rival's customers is always optimal. When demand is asymmetric, however, it may be more profitable to charge a lower price to one's own customers. Surprisingly, price discrimination can lead to lower prices to all consumers, not only to the group that is more elastic, but also to the less elastic group.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
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Depositing User: Nicola Secker
Date Deposited: 01 Apr 2011 07:56
Last Modified: 21 Apr 2020 21:19
URI: https://ueaeprints.uea.ac.uk/id/eprint/27842
DOI:

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