- Abstract:
- 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.
- Journal:
- Journal of Industrial Economics
- Volume:
- 37
- Publication date:
- 1988
- URN:
-
uuid:8afaf96d-4e5a-4d0b-b34c-0ec8fb24ece5
- Local pid:
- oai:economics.ouls.ox.ac.uk:10998
- Language:
- English
- Copyright date:
- 1988
Journal article
Welfare Effects of Entry into Markets with Switching Costs.
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