Switching costs in two-sided markets

Lam, Wing Man Wynne (2017) Switching costs in two-sided markets. Journal of Industrial Economics, 65 (1). 136–182. ISSN 0022-1821

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In many markets, there are switching costs and network effects. Yet the literature generally deals with them separately. This paper bridges the gap by analyzing their interaction (or ‘indirect bargain’) in a dynamic two-sided market. It shows that in the symmetric equilibrium, the classic result that the first-period price is U-shaped in switching costs does not emerge, but instead switching costs always intensify the first-period price competition. Moreover, an increase in switching costs on one side decreases the first-period price on the other side. Policies that ignore these effects may overestimate the extent to which switching costs can reduce welfare.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Faculty of Social Sciences > Research Groups > Responsible Business Regulation Group
Depositing User: Pure Connector
Date Deposited: 15 Sep 2017 05:07
Last Modified: 30 Jan 2024 01:53
URI: https://ueaeprints.uea.ac.uk/id/eprint/64880
DOI: 10.1111/joie.12133


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