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Author: J. Miguel Villas-Boas Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
When consumers have switching costs of changing the product that they purchase from period to period firms may compete aggressively to attract them, to potentially take advantage of the consumers' future inertia. Similarly, consumers may foresee that they may be held up, and adjust their choices. This paper considers these market forces in the literature on switching costs, while focusing on the effects of (1) firms being forward-looking, (2) consumers being forward-looking, (3) degree of stability of consumer preferences, and (4) market time horizon.
Author: J. Miguel Villas-Boas Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
When consumers have switching costs of changing the product that they purchase from period to period firms may compete aggressively to attract them, to potentially take advantage of the consumers' future inertia. Similarly, consumers may foresee that they may be held up, and adjust their choices. This paper considers these market forces in the literature on switching costs, while focusing on the effects of (1) firms being forward-looking, (2) consumers being forward-looking, (3) degree of stability of consumer preferences, and (4) market time horizon.
Author: Andrew Rhodes Publisher: ISBN: Category : Languages : en Pages : 43
Book Description
Consumers often incur costs when switching from one product to another. Recently there has been renewed debate within the literature about whether these switching costs lead to higher prices. We build a theoretical model of dynamic competition and solve it analytically for a wide range of switching costs. We provide a simple condition which determines whether switching costs raise or lower long-run prices. We also show that switching costs are more likely to increase prices in the short-run. Finally switching costs redistribute surplus across time, and as such are shown to sometimes increase consumer welfare.
Author: Jean-Pierre Dubé Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The conventional wisdom in economic theory holds that switching costs make markets less competitive. This paper challenges this claim. We find that steady-state equilibrium prices may fall as switching costs are introduced into a simple model of dynamic price competition that allows for differentiated products and imperfect lock-in. To assess whether this finding is of empirical relevance, we consider a more general model with heterogeneous consumers. We calibrate this model with data from a frequently purchased packaged goods market where consumers exhibit inertia in their brand choices, a behavior consistent with switching costs. We estimate the level of switching costs from the brand choice behavior in this data. At switching costs of the order of magnitude found in our data, prices are lower than without switching costs.
Author: Yang Yang Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This paper studies dynamic pricing and switching cost game under discrete mixed multinomial logit (MMNL) demand. Competing firms can dynamically change prices and redesign their products to in- crease or decrease switching costs in each period to influence the repeat consumers' purchase behavior. Consumers are divided into segments according to their purchase history and incur a one-time switching cost when they switch to the other firm. We characterize the conditions for the existence of equilibrium in single- and multi-period games and identify a key driver for firm's pricing and switching cost strategies: the ”demand-SC relationship.” Our theoretical results formally document three effects of switching costs: the anti-monopoly effect of small switching costs that boosts price competition, the monopoly effect of large switching costs, and the investment effect for forward-looking firms under any switching costs. For the joint effect of the pricing and switching cost strategies, a case study from the smartphone market shows that investing in switching cost can significantly increase firms' profit in a market with relatively small switching costs. However, under relatively large switching costs, switching cost competition may turn into a ”Prisoner's Dilemma” game. Our results show that switching costs could be, ironically, beneficial to consumers and detrimental to firms. The analysis explains why and how proactively controlling consumer switching costs profoundly boosts firms' profitability. Our tractable framework can be used by firms operating in dynamic environments to devise their competitive pricing and switching cost strategies.
Author: Bas Verplanken Publisher: Springer ISBN: 3319975293 Category : Psychology Languages : en Pages : 413
Book Description
This unique reference explores the processes and nuances of human habits through social psychology and behavioral lenses. It provides a robust definition and theoretical framework for habit as well as up-to-date information on habit measurement, addressing such questions as which mechanisms are involved in habitual action and whether people can report accurately on their own habits. Specialized chapters pay close attention to how habits can be modified, as well as widely varying manifestations of habitual thoughts and behaviors, including the mechanisms of drug addiction and recovery, the repetitive characteristics of autism, and the unwitting habits of health professionals that may impede patient care. And across these pages, contributors show the potential for using the processes of maladaptive habits to replace them with positive and health-promoting ones. Throughout this volume attention is also paid to the practice of conducting habit research. Among the topics covered: Habit mechanisms and behavioral complexity. Complexities and controversies of physical activity habit. Habit discontinuities as vehicles for behavior change. Habits in depression: understanding and intervention. A critical review of habit theory of drug dependence. Questions about the automaticity of habitual behaviors. The Psychology of Habit will interest psychologists across a wide spectrum of domains: habit researchers in broader areas of social and health psychology, professionals working in (sub)clinical areas, interested scholars in marketing, consumer research, communication, and education, and public policymakers dealing with questions of behavioral change in the areas of health, sustainability, and/or education.
Author: J. Miguel Villas-Boas
Author: J. Miguel Villas-Boas
Author: Joseph Farrell
Author: Vesela Dimitrova Grozeva
Author: Natalia Fabra
Author: Atilano Jorge Padilla
Author: Andrew Rhodes
Author: Jean-Pierre Dubé
Author: Paul Klemperer
Author: Yang Yang
Author: Bas Verplanken