Langus, Gregor and Lipatov, Vilen (2008): On Quantity Competition With Switching Costs.
Download (209Kb) | Preview
We build a simple model of quantity competition to analyze the effect of switching costs on equilibrium behavior of duopolists. We characterize the industry structure as a function of initial sales of two firms. Contrary to the literature, initial asymmetries persist in our model even though the firms are identical. When the disparity between initial sales is large, the smaller firm may become very aggressive and get more than half of the market in equilibrium. When the firms have similar initial positions, they tend to be locked in them.
|Item Type:||MPRA Paper|
|Original Title:||On Quantity Competition With Switching Costs|
|Keywords:||quantity competition, switching costs|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
|Depositing User:||Vilen Lipatov|
|Date Deposited:||01. Jun 2009 07:09|
|Last Modified:||21. Feb 2013 03:32|
Farrell, Joseph and Carl Shapiro, “Dynamic Competition with Switching Costs,” The RAND Journal of Economics, 1988, 19 (1), 123–137.
Klemperer, Paul, “The Competitiveness of Markets with Switching Costs,” The RAND Journal of Economics, 1987, 18 (1), 138–150.
Klemperer, Paul, “Entry Deterrence in Markets with Consumer Switching Costs,” The Economic Journal, 1987, 97, 99–117.
Klemperer, Paul, “Markets with Consumer Switching Costs,” The Quarterly Journal of Economics, may 1987, 102 (2), 375–394.
Klemperer, Paul and Joseph Farrell, “Coordination and Lock-In: Competition with Switching Costs and Network Effects,” working paper, 2006.
Padilla, A. Jorge, “Mixed pricing in oligopoly with consumer switching costs,” Interna- tional Journal of Industrial Organisation, 1992, 10, 393–411.
von Weizs¨acker, C.C., “The Cost of Substitution,” Econometrica, 1984, 52, 1085–1116.