Welfare Effects of Entry into Markets with Switching Costs.
In many markets, consumers have costs of switching between products that are functionally identical. This note shows that entry of efficient low-cost competitors into these markets may be socially detrimental. In a linear model, entry reduces social welfare (as conventionally defined) in more than h...
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| Format: | Journal article |
| Language: | English |
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1988
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| _version_ | 1826283838204018688 |
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| author | Klemperer, P |
| author_facet | Klemperer, P |
| author_sort | Klemperer, P |
| collection | OXFORD |
| description | In many markets, consumers have costs of switching between products that are functionally identical. This note shows that entry of efficient low-cost competitors into these markets may be socially detrimental. In a linear model, entry reduces social welfare (as conventionally defined) in more than half of the relevant parameter space. In a more general model, there is always a range of values of switching costs for which entry reduces welfare, even if the entrant's production costs are lower than the incumbent's. |
| first_indexed | 2024-03-07T01:04:52Z |
| format | Journal article |
| id | oxford-uuid:8afaf96d-4e5a-4d0b-b34c-0ec8fb24ece5 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T01:04:52Z |
| publishDate | 1988 |
| record_format | dspace |
| spelling | oxford-uuid:8afaf96d-4e5a-4d0b-b34c-0ec8fb24ece52022-03-26T22:35:07ZWelfare Effects of Entry into Markets with Switching Costs.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:8afaf96d-4e5a-4d0b-b34c-0ec8fb24ece5EnglishDepartment of Economics - ePrints1988Klemperer, PIn many markets, consumers have costs of switching between products that are functionally identical. This note shows that entry of efficient low-cost competitors into these markets may be socially detrimental. In a linear model, entry reduces social welfare (as conventionally defined) in more than half of the relevant parameter space. In a more general model, there is always a range of values of switching costs for which entry reduces welfare, even if the entrant's production costs are lower than the incumbent's. |
| spellingShingle | Klemperer, P Welfare Effects of Entry into Markets with Switching Costs. |
| title | Welfare Effects of Entry into Markets with Switching Costs. |
| title_full | Welfare Effects of Entry into Markets with Switching Costs. |
| title_fullStr | Welfare Effects of Entry into Markets with Switching Costs. |
| title_full_unstemmed | Welfare Effects of Entry into Markets with Switching Costs. |
| title_short | Welfare Effects of Entry into Markets with Switching Costs. |
| title_sort | welfare effects of entry into markets with switching costs |
| work_keys_str_mv | AT klempererp welfareeffectsofentryintomarketswithswitchingcosts |