Switching Costs

9/28/98

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Table of Contents

Switching Costs

Kickbacks or Added Value?

A Thought Experiment

Offer Best Price to Competitor’s Customers

Offer Best Price to Own Customers

A Model Market

Baseline: 1 Price to All

Two Prices

Home Price

Away Price

Moral

New Moral

D < 0 ==> overlapping markets

D < 0 ==> double demand elasticity

Differentiation

D > 0

Added Value through Differentiation

Imitate to Differentiate

Saying Thank You

Tips on Saying Thank You

Fly Buys -- Speed

Fly Buys

A Sampling of Programs

New Reward Program

Author: Brandenburger and Nalebuff