Teadusseminar „Competition with endogenous and exogenous switching costs”
- Koht: SOC-317
Neljapäeval, 11. oktoobril kell 16-17 toimub ruumis SOC-317 majandusanalüüsi ja rahanduse instituudi teadusseminar „Competition with endogenous and exogenous switching costs”.
Seminari viib läbi: Tilsa Oré Mónago (Stoney Brooks)
Kokkuvõte inglise keeles:
On the race to gain market power, companies may use strategies to expand and secure their consumer base, by for example, reinforcing consumer inertia by making (to consumers) costly to switch providers. I present a theoretical model I developed on the effect of switching costs in market outcomes and complement it with an empirical application to Peruvian mobile phone market.
I developed a general theoretical framework for dynamic competition under the presence of two types of switching costs: switching fees (endogenous to providers), and individual-specific costs (exogenous to providers). In a two-period game, two providers compete in prices and switching fees, and can price discriminate between old (loyal) and new (switchers) consumers. I found there are symmetric subgame perfect equilibria in pure strategies, where the market is split equally between providers and a third of the population switch in the second period. Equilibrium prices and switching fees are not uniquely determined, but total discounted payoffs for providers and consumers are. These total payoffs are unaffected by the ability to set switching fees but are directly affected by individual (exogenous) switching costs. Switching fees are neutral; they only intensify intertemporal price variation and, therefore, affect intertemporal payoffs by accentuating the trade-off between present and future benefits. These results explain the coexistence of competing providers that set and dismiss switching fees. They also suggest that regulatory policies should reduce individual switching costs (policies such as number portability, standardization or compatibility) rather than eliminate or regulate switching fees.
Based on this theory, I then present some empirical evidence from the Peruvian mobile telecommunications market that supports some of my theoretical predictions. I estimate the effect of the unlocked-handset policy recently implemented on prices and demand. I found a significant negative effect of switching costs on demand for voice traffic (which suggest a positive effect of the unlocked-handset policy on demand) and positive network effects on the demand. The policy, by reducing consumer switching costs, would have generated an increase of 39.7% in the minutes consumed by switchers. Moreover, any change of consumer status (company or consumption plan) is associated with 31.2% increase in minutes consumed. I also found that, with lower significance level, the policy would have induced a reduction of per-minute prices by 9.6%.
Majandusanalüüsi ja rahanduse instituudi teadusseminarid toimuvad tavaliselt kuu teisel ja neljandal kolmapäeval. Seminarid on kõikidele huvitatud osalejatele avatud ning nende eesmärgiks on ettekannete arutelu ja teaduskoostöö edendamine. Ettekanne kestab u 45 minutit, millele järgneb veerand tundi arutelu. Seminar toimub tavaliselt inglise keeles. Ettekande aluseks olev artikkel on kättesaadav seminaril kohapeal. Küsimuste korral võib pöörduda seminaride korraldaja prof. Karsten Staehr’i poole, karsten dot staehr at ttu dot ee.