In markets with switching costs, firms increase their price as their market share grows. I study the effect of entry on these price dynamics in the Dutch mortgage market. Since en- try occurred in a subset of markets, I control for market-level shocks with a differences-in- differences strategy. Moreover, I exploit the multi-product nature of incumbents to control for unobserved firm-level differences. Consistent with a simple theoretical framework, banks with more locked-in customers decrease their interest rates less after entry. This can explain why policies that encourage competition often disappoint in markets with switching costs. I also discuss implications for competition policy.
|Status||Udgivet - 2019|
|Begivenhed|| 46th Annual Conference of the European Association for Research in Industrial Economics. EARIE 2019 - Ciutadella of the Universitat Pompeu Fabra, Barcelona, Spanien|
Varighed: 30 aug. 2019 → 1 sep. 2019
Konferencens nummer: 46
|Konference||46th Annual Conference of the European Association for Research in Industrial Economics. EARIE 2019|
|Lokation||Ciutadella of the Universitat Pompeu Fabra|
|Periode||30/08/2019 → 01/09/2019|
Thiel, J. H. (2019). Competition and Dynamic Pricing in Markets with Consumer Switching Costs. Afhandling præsenteret på 46th Annual Conference of the European Association for Research in Industrial Economics. EARIE 2019, Barcelona, Spanien.