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Why and how should innovative industries with high consumer switching costs be re-regulated ?

Author

Listed:
  • Jackie Krafft

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique)

  • Evens Salies

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract
The existence of costs to consumers to switch between products is central to the process by which firms set prices. Their effect on the introduction and diffusion of innovative technologies is not by now well understood, however. This paper aims to study this effect based on evidence in the broadband Internet industry. We discuss the movement of deregulation implemented since the early 2000s in France and the potential impact consumer switching costs may have had on it. We argue the existence of a cost to consumers to switch between connexion technologies may impede the expected beneficial outcomes of self-regulation through competition in liberalised innovative industries as it has been implemented so far in several countries. This is illustrated by providing a discussion of the low penetration rate of cable in France possibly due to the high cost to retail consumers to switch their DSL modems which, in returns supports the domination of this latter. These results suggest that retail broadband Internet markets may need some sort of re-regulation, including new principles for competition policy, to avoid the unwanted effects of consumer switching costs.

Suggested Citation

  • Jackie Krafft & Evens Salies, 2008. "Why and how should innovative industries with high consumer switching costs be re-regulated ?," SciencePo Working papers Main hal-00973051, HAL.
    • Handle: RePEc:hal:spmain:hal-00973051
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-00973051
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    References listed on IDEAS

    as
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    2. Evens Salies, 2012. "Product Innovation when Consumers have Switching Costs," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 31, Edward Elgar Publishing.
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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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