Competition, Collective Switching Costs, and Market Performance
Switching costs affect competition. When a consumer faces switching costs, the rational consumer will not switch to the supplier offering the lowest price if the switching costs in terms of monetary cost, effort, time, uncertainty, and other reasons, outweigh the price differential between the two suppliers. If this happens, the consumer is said to be locked-in to the supplier. If a supplier manages to lock-in consumers, the supplier can raise prices to a certain point without fear of losing customers because the additional effects of lock-in (time, effort, etc.) prevent the consumer from switching.
Read more about this topic: Switching Barriers
Famous quotes containing the words collective, market and/or performance:
“It is difficult to generalize why so many Latino/as moved toward conservative ... views.... for many, I believe it is basically a matter of desiring material acquisitions. It is difficult to maintain a collective ideology in a society where possessions and power-status equal self-worth.”
—Ana Castillo (b. 1953)
“It is a sign of our times, conspicuous to the coarsest observer, that many intelligent and religious persons withdraw themselves from the common labors and competitions of the market and the caucus, and betake themselves to a certain solitary and critical way of living, from which no solid fruit has yet appeared to justify their separation.”
—Ralph Waldo Emerson (1803–1882)
“There are people who think that wrestling is an ignoble sport. Wrestling is not sport, it is a spectacle, and it is no more ignoble to attend a wrestled performance of suffering than a performance of the sorrows of Arnolphe or Andromaque.”
—Roland Barthes (1915–1980)