Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/181759
Authors: 
Fourberg, Niklas
Year of Publication: 
2018
Series/Report no.: 
DICE Discussion Paper 296
Abstract: 
Consumer switching costs cause the market demand of consumers who already bought a supplier's product to be less elastic while they simultaneously increase competition for new consumers. I study the effect of this twofold pricing incentive on firms' price setting behavior in a 2x2 factorial design experiment with and without communication and under present and absent switching costs. For Bertrand duopolies consumer switching costs reduce the price level vis-à-vis new consumers but do not affect price levels towards old consumers. Markets are overall less tacitly collusive which translates into higher incentives to collude explicitly. Text-mining procedures reveal linguistic characteristics of the communicated content which correlate with market outcomes and communication's effectiveness. The results have implications for antitrust policy, especially for the focus of cartel screening.
Subjects: 
Switching Costs
Cartels
Collusion
Experiments
JEL: 
C7
C9
L13
L41
ISBN: 
978-3-86304-295-0
Document Type: 
Working Paper
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