1992/01/01 by Tore Nilssen
Business, Management and Accounting · Economics, Econometrics and Finance · #Consumer Market Behavior and Pricing #Digital Platforms and Economics #Merger and Competition Analysis
paper · doi:10.2307/2555907
openalex publication_date 1992/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
In this article, I introduce a distinction between two kinds of consumer switching costs: and costs. While transaction costs are incurred by a consumer at every switch between suppliers, learning costs are incurred only at a switch to a supplier that is new to him. In a multiperiod duopoly model, I examine the effects of changing the proportion of each kind of consumer switching costs, while holding total switching costs constant. I show that an increase in transaction costs, relative to learning costs, increases the price offered to loyal consumers. This, then, has the further effect of decreasing the introductory price in the market. It also leads to a decrease in welfare.