This paper proposes a method to identify and quantify switching costs using firm-level data. The method is based on a simple thought experiment that compares the behavior of already contracted consumers to the behavior of new consumers, as the latter are not subject to switching costs. In two panel regressions on new and quitting consumers, we look at the differential response to firm-specific price changes, and identify switching costs from the difference between the two. We apply our method to the Hungarian personal loan market. We cannot present the results before the publication of the corresponding GVH inquiry (see main text), expected in April 2008.
Gabor Kezdi (Central European University)
The Mannheim Competition Policy Forum is designed to give researchers and representatives from practice an opportunity to discuss competition policy issues and points of view.
The Forum will address, for example, problems that occur in detecting and punishing cartels. Furthermore, it will examine the various possible effects of mergers, for example on companies’ product prices or their product range and innovative behaviour. It will explain the advantages and disadvantages of various simulation models which allow an assessment of competition effects prior to a merger. It also intends to discuss possibilities of preventing the abuse of dominant market positions. By providing an exchange of ideas on these and other topics, the Mannheim Competition Policy Forum will make a valuable contribution to improving transfer of scientific findings to competition policy practice.
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