Journal of Industry, Competition and Trade

, Volume 13, Issue 3, pp 431–452 | Cite as

Estimating Consumer Lock-In Effects from Firm-Level Data

Article

Abstract

This paper proposes a practical method for estimating consumer lock-in effects from firm-level data. The method compares the behavior of already contracted consumers to the behavior of new consumers, the latter serving as a counterfactual to the former. In panel regressions on firms’ incoming and quitting consumers, we look at the differential response to price changes and identify the lock-in effect from the difference between the two. We discuss the potential econometric issues and measurement problems and offer solutions to them. We illustrate our method by analyzing the market for personal loans in Hungary and find strong lock-in effects.

Keywords

lock-in switching costs demand analysis difference-in-differences personal loans 

JEL Classification

C33 D12 L13 

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.Central European UniversityBudapestHungary
  2. 2.Institute of EconomicsResearch Centre for Economic and Regional Studies of the Hungarian Academy of SciencesBudapestHungary

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