Switching Beers? The Effects of Switching Costs on Prices and Profits in Competitive Markets

Arbeitspapier

We consider a dynamic oligopoly on the beer market and study the differential effects of switching costs on product prices, market shares, and profits. Our demand estimation results show large differences in brand loyalty, and switching costs across customer income segments and beer brands. Our supply estimation results show that the low-quality firm experiences a higher competitive pressure on price since low-quality consumers are more price sensitive and switch more easily to the high-quality firm’s product than vice versa. The high-quality firm is better shielded from price competition, as its consumers are less likely to switch to the low-quality product.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9065

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Firm Performance: Size, Diversification, and Scope ; Food; Beverages; Cosmetics; Tobacco; Wine and Spirits ; Business Economics ; Marketing
• Subject: consumer heterogeneity ; differentiated products ; dynamic oligopoly ; dynamic pricing ; loyalty ; state dependence ; switching costs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): He, Xiaoyang ; Siebert, Ralph
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/235435
• Last update: 10.03.2025, 11:45 AM CET