Switching Costs or Search Costs?

Moshkin, Nickolay; Shachar, Ron

doi:10.2139/ssrn.219769

Cited by 6 publications

(4 citation statements)

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“…sistence, and one of them is switching costs. (In contrast, Moshkin and Shachar [2000] show how imperfect information and search costs lead to viewing persistence.) One distinct and salient feature of watching television (versus other leisure activities, such as social events, sport activities, or reading) is its passive nature-for many people, watching television is a way to relax.…”

Section: Switching Costsmentioning

confidence: 99%

Cast Demographics, Unobserved Segments, and Heterogeneous Switching Costs in a Television Viewing Choice Model

Shachar

Emerson

2000

Journal of Marketing Research

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An accurate television viewing choice model is an important tool for television executives and advertisers. The authors present a new viewing choice model, which differs from the traditional Rust-Alpert model in three ways: (1) It introduces a new show characteristic—the demographic characteristics of a show's cast; (2) it allows the preferences over the traditional show categories to be a function of both observable and unobservable individual characteristics; and (3) it allows the cost of switching among the viewing alternatives to vary across show types and individual characteristics. Cross-validated predictive testing shows that this model fits the data better than the Rust–Alpert model does. Furthermore, the authors demonstrate that network executives can improve ratings by using this model. The authors predict that by following their scheduling strategies (in particular, by broadcasting comedies after 10:00 P.M.), ABC, CBS, and NBC could have increased their average ratings by 12.9%, 7.5%, and 6.7%, respectively, on selected evenings.

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Section: Switching Costsmentioning

confidence: 99%

Cast Demographics, Unobserved Segments, and Heterogeneous Switching Costs in a Television Viewing Choice Model

Shachar

Emerson

2000

Journal of Marketing Research

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“…could be the result of either switching or search costs. On the other hand, Moshkin and Shachar (2000) develop a discrete-choice empirical model to estimate how many consumers behave as if they have switching costs and search costs respectively. Their test is based on the fact that whereas the switching probability of a consumer facing search costs depends on the match between his tastes and the attributes of the alternative he last chose, the switching probability of a consumer facing switching costs depends on the match between his tastes and the attributes of all available alternatives.…”

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confidence: 99%

“…Other empirical studies, many of which we will discuss below in the context of speci c theories, provide evidence for the importance of switching costs for credit cards (Ausubel (1991), Calem and Mester (1995), Stango (2002)); cigarettes Mills (1998, 1999)); computer software (Larkin (2004)); supermarkets (Chevalier and Scharfstein (1996)); air travel, and alliances of airlines in di erent frequent-yer programmes (Fernandes (2001), Carlsson and L• ofgren (2004)); individual airlines for di erent ight-segments of a single trip (Carlton, Landes, and Posner (1980)); phone services (Knittel (1997), Gruber and Verboven (2001), Viard (forthcoming)); television viewing choices (Moshkin and Shachar (2000)); online brokerage services (Chen and Hitt (2002)); electricity suppliers (Waterson (2003)); bookstores (Lee and Png (2004)); and automobile insurance (Schlesinger andvon der Schulenberg (1993), Israel (2005), Waterson (2003)). …”

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confidence: 99%

Coordination and Lock-In: Competition with Switching Costs and Network Effects

2006

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PRELIMINARY DRAFT: PLEASE SEND COMMENTSKEYWORDS: switching costs, network e ects, lock-in, network externalities, co-ordination, indirect network e ects JEL CLASSIFICATIONS: L130 market structure, rm strategy and market performance: oligopoly and other imperfect markets; monopolistic competition; contestable markets L150 information and product quality; standardization and compatibility L120 market structure, rm strategy and market performance: monopoly L140 transactional relationships: contracts and reputation: networks D430 market structure and pricing: oligopoly and other forms of market imperfection D420 market structure and pricing: monopoly. ACKNOWLEDGMENTS: We're grateful to many friends and colleagues for numerous helpful suggestions and comments over several substantial rewrites of this paper since our rst 1997 draft. Special thanks are due to Alan Beggs, Simon AbstractSwitching costs and network e ects bind customers to vendors if products are incompatible, locking customers or even markets in to early choices. Lock-in hinders customers from changing suppliers in response to (predictable or unpredictable) changes in e ciency, and gives vendors lucrative ex post market power|over the same buyer in the case of switching costs (or brand loyalty), or over others with network e ects.Firms compete ex ante for this ex post power, using penetration pricing, introductory o ers, and price wars. Such \competition for the market" or \life-cycle competition" can adequately replace ordinary compatible competition, and can even be ercer than compatible competition by weakening di erentiation. More often, however, incompatible competition not only involves direct e ciency losses but also softens competition and magni es incumbency advantages. With network e ects, established rms have little incentive to o er better deals when buyers' and complementors' expectations hinge on non-e ciency factors (especially history such as past market shares), and although competition between incompatible networks is initially unstable and sensitive to competitive o ers and random events, it later \tips" to monopoly, after which entry is hard, often even too hard given incompatibility. And while switching costs can encourage small-scale entry, they discourage sellers from raiding one another's existing customers, and so also discourage more aggressive entry.Because of these competitive e ects, even ine cient incompatible competition is often more pro table than compatible competition, especially for dominant rms with installed-base or expectational advantages. Thus rms probably seek incompatibility too often. We therefore favor thoughtfully pro-compatibility public policy.

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“…Brands can also be used to heighten consumer loyalty so when faced with a choice among numerous substitutes, consumers can identify a product that they know or have been told about. Essentially, shoppers are faced with asymmetric information about untested or unannounced brands (Moshkin & Shachar, 2000). This effect, which can be reinforced by advertising expenditure and brand longevity, may erect enough barriers to entry that incumbents earn super‐normal profits (see Schmalensee, 1978).…”

Section: Introductionmentioning

confidence: 99%

Labelling Characteristics and Demand for Retail Grocery Products in Australia*

Jensen

Webster

2008

Australian Economic Papers

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This paper examines whether labelling characteristics affect short-run demand for manufactured foods in Australia. We estimate the effect of common labelling characteristics on demand using data from 92 brands in 12 product categories from major supermarket stores across Australia over the period 2002 to 2005. We find that certain characteristics -such as whether the product is made from recycled materials, certified as being Australian-made, is a private label product, is health-conscious or supports a charity -have a positive effect on demand. However, being an environmentally-friendly good had a negative impact on demand as did products which offer the chance to win a prize and uncertified Australian-made goods. I . I n t r o d u c t i o nCompetition amongst firms is typically driven by strategies designed to extract production efficiencies or through product differentiation. In many product markets, such as staple manufactured foods, increased production efficiencies are difficult to achieve given the maturity of the technology. As a result, many firms rely on product differentiation strategies to attract consumers. In this paper, we look at one such strategy -the use of labelling characteristics by manufacturers of groceries. Specifically, we examine whether firms stimulate demand for their products by applying labels which signal a product's unobservable characteristics such as whether it is environmentallyfriendly, low in fat/salt, made-in-Australia, or made from recycled materials. Although there are a range of issues across the supply chain from farm-gate to retailer, our interest here is on the effects of the manufacturer's decision to include labelling characteristics on demand.To examine this issue, we use pooled monthly data from ACNielsen on a bundle of 92 goods in 12 product categories from major supermarkets across Australia over the period February 2002 to January 2005. To abstract from differences in product quality, only mature product categories the product was substantially homogeneous were selected. 1 To further control for product quality issues, goods within a product category were only selected if they were of a similar quality. 2 In this manner, we controlled for product quality through sample design rather These 12 product categories are bread, canned fruit, tea, tomato sauce, rice, pasta, pasta sauce, milk, toilet paper, frozen chips, laundry detergent and salad dressing. 2 Consider the case of the milk product category, for example. Only brands selling fresh, full cream milk were included in our dataset -skim milk, long life milk, calcium-enriched milk and flavoured milk products were all excluded from our study.

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Switching Costs or Search Costs?

Cited by 6 publications

References 6 publications

Cast Demographics, Unobserved Segments, and Heterogeneous Switching Costs in a Television Viewing Choice Model

Cast Demographics, Unobserved Segments, and Heterogeneous Switching Costs in a Television Viewing Choice Model

Coordination and Lock-In: Competition with Switching Costs and Network Effects

Labelling Characteristics and Demand for Retail Grocery Products in Australia*

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