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Switching Costs (switching + cost)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	82%

Selected Abstracts

Technological Incompatibility, Endogenous Switching Costs and Lock-in

THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 3 2001
Begoña Garcia Mariñoso
Systems are goods comprising of durables that are sequentially updated with complements. With sequential purchases, if suppliers produce incompatible brands, consumers who upgrade systems with complements of a different brand must replace the durables they own. Thus, the price of these durables is an endogenous switching cost. The paper deals with the concern that firms may use incompatibility to create consumer's switching costs to reduce competition in aftermarkets. However, it shows that, with homogenous durables, and small costs of reaching compatibility, endogenous switching costs increase intertemporal price competition to the extent that producers prefer to have compatible technologies. [source]

Switching costs, dynamic uncertainty, and buyer,seller relationships,

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 8 2007
Nagesh N. Murthy
Abstract We analyze strategic relationships between buyers and sellers in markets with switching costs and dynamic uncertainty by investigating the scenario wherein a representative buyer trades with two foreign sellers located in the same foreign country. We show that, under exchange rate uncertainty, switching costs may lead to switching equilibria where both sellers co-exist in the market with the buyer, or no-switching equilibria where either seller captures the market. The presence of exchange rate uncertainty facilitates competition by allowing the sellers to co-exist in the market with the buyer. However, if the level of uncertainty is beyond a threshold, the only viable equilibria are those where one of the sellers captures the market. Further, depending on the level of exchange rate uncertainty and the sellers' variable costs, switching costs may either raise or lower the level of prices in long-term contracts between the buyer and the sellers. © 2007 Wiley Periodicals, Inc. Naval Research Logistics, 2007 [source]

Equilibrium Partner Switching in a Bargaining Model With Asymmetric Information

INTERNATIONAL ECONOMIC REVIEW, Issue 4 2000
Gianni De Fraja
We study a model in which the seller of an indivisible object faces two potential buyers and makes an offer to either of them in each period. We find that the seller's ability to extract surplus from them depends crucially on the value of the cost of switching from one buyer to the next. If the seller is pessimistic about the buyers' valuations and there is a switching cost, however small, then the market is a natural bilateral monopoly; the second buyer is never called on. If the switching cost is zero, or if the seller is optimistic, then switching, and possibly recall of the original buyer, may occur. [source]

Strategic dynamic sourcing from competing suppliers with transferable capacity investment

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 6 2009
Cuihong Li
Abstract We study the supplier relationship choice for a buyer that invests in transferable capacity operated by a supplier. With a long-term relationship, the buyer commits to source from a supplier over a long period of time. With a short-term relationship, the buyer leaves open the option of switching to a new supplier in the future. The buyer has incomplete information about a supplies efficiency, and thus uses auctions to select suppliers and determine the contracts. In addition, the buyer faces uncertain demand for the product. A long-term relationship may be beneficial for the buyer because it motivates more aggressive bidding at the beginning, resulting a lower initial price. A short-term relationship may be advantageous because it allows switching, with capacity transfer at some cost, to a more efficient supplier in the future. We find that there exists a critical level of the switching cost above which a long-term relationship is better for the buyer than a short-term relationship. In addition, this critical switching cost decreases with demand uncertainty, implying a long-term relationship is more favorable for a buyer facing volatile demand. Finally, we find that in a long-term relationship, capacity can be either higher or lower than in a short-term relationship. © 2009 Wiley Periodicals, Inc. Naval Research Logistics 2009 [source]

Technological Incompatibility, Endogenous Switching Costs and Lock-in

Corporate Governance, Audit Firm Reputation, Auditor Switches, and Client Stock Price Reactions: The Andersen Experience

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2010
Sharad C. Asthana
The financial scandal surrounding the collapse of Enron caused erosion in the reputation of its auditor, Arthur Andersen, leading to concerns about Andersen's ability to continue in existence and ultimately to the firm's demise. In this paper we investigate the role of corporate governance on the timing of the auditor switch by former Andersen clients. After controlling for factors associated with switching costs, we find clients with strong corporate governance were more likely to switch early. We also find that clients switching from Andersen experienced positive abnormal returns during the three-day window surrounding the announcement of the switch. We attribute this positive response to the reduction in uncertainty associated with the cost of finding a new auditor. [source]

Exploring Chinese consumer repurchasing intention for services: An empirical investigation

JOURNAL OF CONSUMER BEHAVIOUR, Issue 6 2008
LI Dongjin
With the increasingly tough competition, companies are trying to keep existing customers as well as expand the market base in China, which implies that understanding the Chinese consumer repurchasing intention has become one of the important issues. Consumer repurchase intention is an important indicator to predict repurchase behavior. The aim of this paper is to understand the factors that influence consumer repurchase intention in China. Specifically, this paper explores the relationship between perceived values, customer satisfaction, switching costs, purchase interval, and repurchase intention in China with Structural Equation Modeling. The empirical study finds that perceived value, customer satisfaction, and switching costs are positively related to the repurchase intention while purchase interval does not have significant influence on the repurchase intention. In addition, the perceived value is positively related to the customer satisfaction and there is no significant relationship between switching costs and customer satisfaction. Copyright © 2008 John Wiley & Sons, Ltd. [source]

State Dependence at Internet Portals

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2006
Avi Goldfarb
This study offers evidence of the existence of switching costs on the Internet. It uses more flexible methods than previously possible to separate switching costs from serially correlated unobservables at Internet portals. The data contain nearly 1,000 observations per household, allowing for household-specific regressions that control for all household-specific heterogeneity. The results show that households exhibit switching costs. The loyalty generated by these costs drives a large fraction of portal visits and generates considerable revenues; however, these revenues are not large enough to justify the losses incurred by Internet portals in the 1990s while building market share. The results also suggest that random coefficients models overestimate true state dependence. [source]

Maintenance contracts for leased goods: their role in creating brand loyalty

MANAGERIAL AND DECISION ECONOMICS, Issue 7 2000
Julie Hunsaker
Using a two-period switching cost model, this paper compares rental profit with sales profit in a framework in which duopolists produce horizontally differentiated durable goods. Rental firms use maintenance contracts that stipulate that repeat customers pay a lower fine per unit of damage than do those customers who switch to a rival firm. In the sales regime, firms give loyal customers a discount on their second period prices. If switching costs are zero, sales profit equals rental profit. For positive and identical switching costs, either regime can dominate. As the exogenous rate of depreciation falls, rental profit exceeds sales profit. Copyright © 2000 John Wiley & Sons, Ltd. [source]

Switching costs, dynamic uncertainty, and buyer,seller relationships,

Service quality, perceived value, corporate image, and customer loyalty in the context of varying levels of switching costs

PSYCHOLOGY & MARKETING, Issue 3 2010
Chung-Yu Wang
The current study moves beyond customer-perceived value and corporate image and demonstrates that switching costs are important factors in influencing a customer's decision to stay with a service provider. This work finds support for a contingency model involving customer-perceived value, corporate image, and switching costs. The results indicate that the impacts of customer-perceived value and corporate image on customer loyalty decrease under conditions of high switching costs. Implications of the results are discussed. © 2010 Wiley Periodicals, Inc. [source]

Customer perceived value, satisfaction, and loyalty: The role of switching costs

PSYCHOLOGY & MARKETING, Issue 10 2004
Zhilin Yang
It is a marketplace reality that marketing managers sometimes inflict switching costs on their customers, to inhibit them from defecting to new suppliers. In a competitive setting, such as the Internet market, where competition may be only one click away, has the potential of switching costs as an exit barrier and a binding ingredient of customer loyalty become altered? To address that issue, this article examines the moderating effects of switching costs on customer loyalty through both satisfaction and perceived-value measures. The results, evoked from a Web-based survey of online service users, indicate that companies that strive for customer loyalty should focus primarily on satisfaction and perceived value. The moderating effects of switching costs on the association of customer loyalty and customer satisfaction and perceived value are significant only when the level of customer satisfaction or perceived value is above average. In light of the major findings, the article sets forth strategic implications for customer loyalty in the setting of electronic commerce. © 2004 Wiley Periodicals, Inc. [source]

The Impact of Bank Consolidation on Commercial Borrower Welfare

THE JOURNAL OF FINANCE, Issue 4 2005
JASON KARCESKI
ABSTRACT We estimate the impact of bank merger announcements on borrowers' stock prices for publicly traded Norwegian firms. Borrowers of target banks lose about 0.8% in equity value, while borrowers of acquiring banks earn positive abnormal returns, suggesting that borrower welfare is influenced by a strategic focus favoring acquiring borrowers. Bank mergers lead to higher relationship exit rates among borrowers of target banks. Larger merger-induced increases in relationship termination rates are associated with less negative abnormal returns, suggesting that firms with low switching costs switch banks, while similar firms with high switching costs are locked into their current relationship. [source]

DYNAMIC PRICE DISCRIMINATION WITH ASYMMETRIC FIRMS,

THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 4 2008
YONGMIN CHEN
This paper considers variants of a dynamic duopoly model where one firm has a stronger market position than its competitor. Consumers' past purchases may reveal their different valuations for the two firms' products. Price discrimination based on purchase histories tends to benefit consumers if it does not cause the weaker firm to exit; otherwise it can harm consumers. The effect of price discrimination also depends on firms' cost differences, market competitiveness, and consumers' time horizon. The stronger firm may price below cost in the presence of consumer switching costs, with the purpose and effect of eliminating competition. [source]