Switching costs, experience goods and dynamic price competition
- Toker Doganoglu
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I analyze a dynamic duopoly with an infinite horizon where consumers are uncertain about their potential satisfaction from the products and face switching costs. I derive sufficient conditions for the existence of a Markov Perfect Equilibrium(MPE) where switching takes place each period. I show that when switching costs are sufficiently low, the prices in the steady state are lower than what they would have been when they are absent. This result is in contrast to those found in the literature. In the presence of low switching costs competition can be fiercer.
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- Switching costs, experience goods and dynamic price competition
Volume 8, Issue 2 , pp 167-205
- Cover Date
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Dynamic price competition
- Experience goods
- Markov-perfect equilibrium
- Switching costs
- Industry Sectors
- Toker Doganoglu (1) (2)
- Author Affiliations
- 1. Department of Business and Economics, University of Southern Denmark, Odense, Denmark
- 2. Faculty of Arts and Sciences, Sabanci University, Istanbul, Turkey