In a duopoly with price discrimination and switching costs, we analyse the evolution of market structure, when an incumbent and a new entrant compete, and a new class of users with lower willingness to pay appears in the market. We find that the market share of the new entrant depends on the degree of heterogeneity and the level of switching costs. In particular, if the degree of heterogeneity is intermediate, the evolution of market structure is similar for high and null switching costs. Since consumer surplus and social welfare are unambiguously lower under high switching costs, this result points at the risk of inferring the degree of market competitiveness from the convergence in market shares.

Switching costs, consumer heterogeneity and price discrimination / N. Corrocher, L. Zirulia. - In: JOURNAL OF ECONOMICS. - ISSN 0931-8658. - 101:2(2010 Oct), pp. 149-167. [10.1007/s00712-010-0149-9]

Switching costs, consumer heterogeneity and price discrimination

L. Zirulia
Primo
2010-10

Abstract

In a duopoly with price discrimination and switching costs, we analyse the evolution of market structure, when an incumbent and a new entrant compete, and a new class of users with lower willingness to pay appears in the market. We find that the market share of the new entrant depends on the degree of heterogeneity and the level of switching costs. In particular, if the degree of heterogeneity is intermediate, the evolution of market structure is similar for high and null switching costs. Since consumer surplus and social welfare are unambiguously lower under high switching costs, this result points at the risk of inferring the degree of market competitiveness from the convergence in market shares.
Price discrimination; Switching costs
Settore SECS-P/01 - Economia Politica
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/2434/906551
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