Pricing and Switching Costs Competition in Oligopoly
Date Issued
2014
Date
2014
Author(s)
Wu, Yu-Fang
Abstract
This research studies the dynamic competition of price and switching costs in an oligopoly market. In this oligopoly market, there are two decision makers, leader and follower. Firms sell products to the market and customers can purchase products from one firm. Customers who switch from one provider to another incur a one-time nonnegative switching cost. Switching costs affect customers’ demand and firms’ pricing strategy. The main difference from prior research is that we allow firms to control switching costs through investment. We develop a multi-period dynamic game model considering market share and uncertainty of technology level to investigate the strategic interaction between leader and follower in pricing and switching costs investment. The research provides useful insights in product competition through numerical analysis.
Subjects
Switching Costs
Dynamic Price
Market Share
Dynamic Game
Type
thesis