Multi-Period Competition with Switching CostsAn Overlapping Generations FormulationI examine an infinite-period duopoly market with positive consumer switching costs and overlapping generations of consumers. When consumers have a finite time-horizon, then, unlike Beggs and Klemperer [1992], the two firms may alternate dominance from one period to the next, alternately charging high and low prices. This agrees with the intuition that firms with a high locked-in market share may set price so as to exploit that market share, which causes a subsequent low market share among the new cohort of buyers, leading to lower prices, etc.JEL codes: L13, D21, D43, D92. A PDF version of the paper is downloadable. |