Low Switching Costs Research Articles

Developing a loyal community: an empirical analysis evaluating antecedents to loyalty in social networking

One of the most influential phenomena in information and communication technology ICT since the advent of the internet has been network effects. The benefits obtained from networking effects is exponentially significant due to the popularity of social networking and the abundance of information being collected through these networks. With the multitude of networks to choose from and relatively low switching costs, sustaining loyalty among the users has become a top priority of network administrators. Using structural equation modelling, a model was developed and tested identifying factors that influence loyalty in social networking. It was shown that trust community members that have connected together along with satisfaction in the network positively influence loyalty. Content quality and system quality are factors that positively influence a users satisfaction in the community. Academic and practical implications are discussed along with recommendations for future research.

The influence of switching costs and satisfaction on loyalty towards smartphone service providers

Introduction: With the rapid development of communication technologies and the introduction of smartphones in the marketplace, the industry of mobile phone communication services is making great efforts to attract new customers and retain current ones. Purpose: This study aims to analyse how the switching costs and customer satisfaction influence customers' loyalty towards the smartphone service provides. Additionally, the mediating role of customer loyalty is also examined. Methodology: For this purpose, drawing on a sample of 370 customers, an analysis was developed through structural equation modelling. Findings: Our findings suggest that customer satisfaction with their smartphone services is determined by two key variables - service value and corporate image - while switching costs exert a low influence on customer satisfaction. Implications: Considering that our findings highlight low switching costs, service providers should focus their marketing efforts towards attracting new customers and increasing primary demand, rather than retaining their existing customers.

A bilingual advantage in task switching? Age-related differences between German monolinguals and Dutch-Frisian bilinguals

This study investigated whether lifelong bilingualism can be associated with enhanced executive control, particularly mental flexibility, and with a modulation of an age-related decline in these functions. We compared performance of middle-aged and elderly speakers of German and bilingual speakers of Dutch and Frisian in a cued task-switching paradigm. All bilinguals were fluent in the same, closely-related language pairs. Bilinguals incurred significantly lower switching costs than monolinguals, and elderly bilinguals were less affected by an age-related increase in switching costs than monolinguals. Bilinguals did not differ from monolinguals in the size of the mixing costs. Our findings suggest that lifelong bilingualism correlates with enhanced ability to shift between mental sets, as well as increased resistance to proactive interference. The fact that we found significant group differences – while some previous studies did not – may be attributable to the choice of our task and to the cognateness of the languages involved.

Horizontal Mergers and Innovation in Concentrated Industries

An open question in antitrust economics is whether allowing rival firms to merge increases or decreases incentives to invest and innovate? I examine this in a dynamic oligopoly model with endogenous investment, entry, exit and horizontal mergers. Firms produce differentiated goods and may merge with rival firms to gain market power and increase the quality of their product. I extend previous work on dynamic mergers by allowing for differentiated goods with competition in prices, more than 2 firms in the market, and an endogenous long run rate of innovation. In equilibrium, horizontal mergers are mostly harmful to consumers in the short run, but the prospect of a buyout creates a powerful incentive for firms to enter the industry and invest to make themselves an attractive merger partner. The result is significantly higher total innovation with mergers than without and significantly higher long-run consumer welfare as well. This result also helps shed light on the larger question of the relationship between the competition and innovation. Further results show that long run welfare is increased most by mergers in industries with low consumer switching costs or brand loyalty, as well as in industries where large and rapid innovation is possible.

Online Copyright Enforcement, Consumer Behavior, and Market Structure

Taking down copyright-infringing websites is a way to reduce consumption of pirated media content and increase licensed consumption. We analyze the consequences of the shutdown of the most popular German video streaming website - kino.to - in June 2011. Using individual-level clickstream data, we find that the shutdown led to significant but short-lived declines in piracy levels. The existence of alternative sources of unlicensed consumption, coupled with the rapid emergence of new platforms, led the streaming piracy market to quickly recover from the intervention and to limited substitution into licensed consumption. Our results therefore present evidence of a high elasticity of supply in the online movie piracy market, together with relatively low switching costs for users of copyright infringing platforms. The postshutdown market structure was much more fragmented, thus making it potentially more resistant to any future interventions.

Show Me Yours and I'll Show You Mine: Sharing Borrower Information in a Competitive Credit Market

We exploit contract-level data on approved and rejected small-business loans to assess the impact of a new credit registry in Bosnia and Herzegovina. Our findings are threefold. First, mandatory information sharing tightens lending at the extensive margin as loan officers reject more applications. These rejections are based increasingly on hard information — especially registry information on applicants’ outstanding debt — and less on soft information. Second, lending standards also tighten at the intensive margin: information sharing leads to smaller, shorter and more expensive loans for first-time borrowers. Yet, in line with lower switching costs, repeat borrowers gain from information sharing. Third, the tightening of lending standards results in fewer defaults, in particular among first-time borrowers, and higher returns on loans. This suggests that a reduction in adverse selection is an important channel through which information sharing affects loan quality.

Switching behavior and customer satisfaction in mobile services: Analyzing virtual and traditional operators

The present study analyses the creation of customer satisfaction and loyalty, along with the influence of switching costs in the mobile services’ market by comparing network – the so-called traditional – and virtual mobile services, in order to empirically and conceptually investigate the difference between these mobile services’ operators.For this purpose we tested a conceptual model by developing structural equation modeling, in the context of a mature market– Spain– gathering a sample of 406 mobile phone users. The analysis highlights that both service value and corporate image exert the strongest influence on customer satisfaction and loyalty both for traditional and virtual mobile services, despite some relevant differences were found regarding switching costs. Since our findings show low switching costs, mobile service providers should focus their marketing efforts toward attracting new customers and increasing the primary demand, rather than retaining their existing customers.

Conflicts of Interest in Medical Technology Markets: Evidence from Orthopedic Surgery

Financial relationships between physicians and industry are vital to biomedical innovation yet create the potential for conflicts of interest in medical practice. I consider an inducement model of the role of financial relationships in health care markets, where consulting payments induce physicians to use more devices of the firms that sponsor them. To test the model, I exploit a policy shock, whereby government monitoring of payments to joint replacement surgeons resulted in declines of over 60% in both total payments and in the number of physicians receiving payments from 2007 to 2008. Using hospital discharge data from three states, I find that the loss of payments leads physicians to switch 7 percentage points of their device utilization from their sponsoring firms' devices to other firms' devices, an effect which is concentrated among surgeons with low switching costs. These results offer support for the inducement model. I also find evidence of an increase in medical productivity following the policy intervention, which suggests conditions under which regulation of financial relationships would be socially beneficial. Copyright © 2015 John Wiley & Sons, Ltd.

Strategic Pricing of Horizontally Differentiated Services with Switching Costs: A Pricing Model for Cloud Computing

ABSTRACTThe pricing of cloud computing services is a major challenge because the industry is in its infancy and firms employ pricing models developed for conventional electronic commerce. In this study, we offer a new approach to cloud services pricing that considers customer behavior. First, we propose a base model centered around a profit-maximizing duopolistic market serving both rational and time-inconsistent customers. Our results reveal that firms can profit from impatient customers. In addition, we extend the base model with the effect of delayed network externalities because typically information goods strongly exhibit this property. For the latter case, we show that the effect of network externalities reduces the impact of low switching costs and firms benefit from time-inconsistent behavior. This study contributes to theories of pricing information goods. Furthermore, practitioners who make pricing decisions for cloud computing services can benefit from our findings.

"Online Copyright Enforcement, Consumer Behavior, and Market Structure"

Taking down copyright-infringing websites is a way to reduce consumption of pirated media content and increase licensed consumption. We analyze the consequences of the shutdown of the most popular German video streaming website - kino.to - in June 2011. Using individual-level clickstream data, we find that the shutdown led to significant but short-lived declines in piracy levels. The existence of alternative sources of unlicensed consumption, coupled with the rapid emergence of new platforms, led the streaming piracy market to quickly recover from the intervention and to limited substitution into licensed consumption. Our results therefore present evidence of a high elasticity of supply in the online movie piracy market, together with relatively low switching costs for users of copyright infringing platforms. The fact that the post-shutdown market structure was much more fragmented - and therefore more resistant to future interventions - further questions the effectiveness of the intervention.

Understanding Sustained Participation in Virtual Travel Communities from the Perspectives of is Success Model and Flow Theory

Virtual travel communities (VTCs) are now popular and influential venues for tourism information sharing. With the increasing number of VTCs and low switching cost, it is challenging to retain existing users and encourage their continued participation. Despite the importance of user retention to VTCs survival, little research attention has been devoted to understanding the members’ continued participation behavior. The purpose of this study is to test a new model of VTC beliefs, attitudes, and continuance behaviors, by integrating information system success model and flow theory. The model integrates measures proven in traditional consumer behavior theory, such as word-of-mouth and satisfaction, with behavioral measures unique to the virtual domain, such as stickiness. The results of a field survey of members of QYER, a Chinese VTC, indicate that system quality and information quality directly affect flow experience and member satisfaction, which ultimately determine site stickiness and word-of-mouth behavior. Furthermore, by modeling system quality and information quality as multifaceted constructs, the results reveal key quality concerns in VTCs. The findings will help academics as well as practitioners gain insights into member retention in VTCs.

Market structure and the competitive effects of switching costs

We revisit the effects of switching costs on dynamic competition. We consider stationary Markovian strategies, with market shares being the state variable, and characterize a relatively simple Markov Perfect pricing equilibrium at which there is switching by some consumers at all times. For the case of low switching costs and infinitely lived consumers, we show that switching costs are pro-competitive in the long-run (steady state) while the overall effect in the short-run (transient state) depends on market structure. In particular, switching costs are anti-competitive in relatively concentrated markets, and pro-competitive otherwise.

Coding Structure and Replication Optimization for Interactive Multiview Video Streaming

Multiview video refers to videos of the same dynamic 3-D scene captured simultaneously by multiple closely spaced cameras from different viewpoints. We study interactive streaming of pre-encoded multiview videos, where, at any time, a client can request any one of many captured views for playback. Moreover, the client can periodically freeze the video in time and switch to neighboring views for a compelling look-around visual effect. We consider distributed content servers to support large-scale interactive multiview video service. These servers collaboratively replicate and access video contents. We study two challenges in this setting: what is an efficient coding structure that supports interactive view switching and, given that, what to replicate in each server in order to minimize the cost incurred by interactive temporal and view switches? We first propose a redundant coding structure that facilitates interactive view-switching, trading off storage with transmission rate. Using the coding structure, we next propose a content replication strategy that takes advantage of indirect hit to lower view-switching cost: in the event that the exact requested view is not available locally, the local server can fetch a different but correlated view from the other servers, so that the remote repository only needs to supply the pre-encoded view differential. We formulate the video content replication problem to minimize the switching cost as an integer linear programming (ILP) problem and show that it is NP-hard. We first propose an LP relaxation and rounding algorithm (termed Minimum Eviction) with bounded approximation error. We then study a more scalable solution based on dynamic programming and Lagrangian optimization (DPLO) with little sacrifice in performance. Simulation results show that our replication algorithms achieve substantially lower switching cost compared to other content replication schemes.

Korean Online Game's Platform Competition under Two-Sided Market Characteristic

While the growth of total game market size slowed down and the arcade game industry started to shrink, the online game market keeps increasing, attaining 26.5% annual growth rate for the early 2010's. Korea's online game business is especially popular, so that the size is about US$ 4 billion, which is 64.2% of Korea's total game industry. In 2013, Game market size and online game market size were estimated to be about US$ 9 billion and US$ 7 billion, respectively. From a standpoint of sales, the game market in Korea (US$ 4.95 billion) accounts for 5.8% of the world game market and almost one third of the world online game market. Its growth rate is higher than that of the world game market. The online game markets in Korea and China have common characteristics that can be distinguished from other countries: two-sided market with very low switching costs. This paper is to study the important factors that affect Korean online game's platform competition. The authors empirically investigate network externalities by using various variables in online game industry in Korea. The authors found the number of games available in a platform positively affects its market share, while the diversity of games and generality of game rating had no significant impacts. The authors also found that multi-homing (or overlap of games) increases an online platform's market share when the platform is relatively new. However, multi-homing decreases market share when it becomes mature. Having done our empirical and academic analyses, the authors draw practical implications that may help decision makers in Korea's online game businesses.

Examining online consumers’ initial trust building from an elaboration likelihood model perspective

Due to the high perceived risk and low switching costs, it is critical for online vendors to foster consumers' initial trust in order to facilitate their online transactions. The extant research ha...

Effects of switching costs on customer attitude loyalty to an airport in a multi-airport region

The purpose is to analyze impacts of switching costs on customer attitude loyalty to an airport operator in a Norwegian multi-airport region. A sample of 167 respondents is analyzed by a structural equations modelling approach. Irrespective of customers’ perceptions of switching costs, service quality seems to be the most important customer loyalty driver. For low switching costs customers flight offers are also an important loyalty driver. For high switching costs customers facilities are important. An anticipated reduction in switching costs due to improvements in the regions’ infrastructure thus implies that more attention should be paid to an upgrading of the flight offers in order to create more airport loyalty in future. This may also have some interesting policy implications, which is briefly discussed in the paper.

Exploring switch intention of users’ reading behaviour

Purpose – This study aims to explore switch intention of users’ reading behaviour. Amazon’s 2007 introduction of the Kindle e-book reader launched a new way of reading. The popularity of e-book readers has exploded over past several years. However, the Chinese e-book reader market is still relatively underdeveloped and underexploited when compared with North America or other regions. At the time, it remained unclear whether consumers could be persuaded to abandon conventional printed books for the new device in the Chinese market. Design/methodology/approach – This research has gathered 352 valid questionnaire samples on an Internet survey from the general population. Path analysis was used to investigate the causal relationships which were hypothesized by the structural equation modelling methodology to identify key factors in intention to switch to the e-book reader. Findings – The results indicate that convenience and social influence were found to have a significant effect on consumer switching intention, while switching cost was found to be a significant obstacle to switching. This research also found that convenience of carry and operation of new technological products will lower switching costs. Furthermore, it will lead consumers to have higher switching intention when surrounding friends and families have good experiences and impressions of using new products. Thus, the manufacturers and sellers of e-readers have to consider the easy-to-handle convenient-to-carry while designing products. And the concept of higher social influence and lower switching cost shall lead the marketing strategies. Originality/value – Recently, some studies address what factors drive users’ willingness to use this new device for reading based on innovation diffusion theory or the technology acceptance model. Few studies have investigated adoption of e-readers for consumers’ perceived innovative and their perception of the costs. Hence, this paper studies the switching intention of readers through dimensions including new product attributes (compatibility, complexity, convenience and e-book content), social influence, price and switching costs and verifies the relationships among these dimensions on Chinese market.

Can fast-food consumers be loyal customers, if so how? Theory, method and findings

Customer loyalty studies generally indicate that fast-food customers are not genuinely loyal to brands or products mainly because they function under low-switching cost conditions. The purpose of this research is to empirically study whether fast-food customers genuinely become loyal and, if so, how. The study adopts the theory and method of the satisfaction-trust-commitment-loyalty explanation chain and examines the consumer survey results obtained under conditions of low-switching costs. Analyses of the results indicate that the proposed relationships provide appropriate explanatory power for the phenomenon at hand and that fast- food customers truly become loyal despite conditions of low-switching costs. The findings and the research and practical implications are thoroughly discussed.

Heterogenous Switching Costs

We consider a simple two period model where consumers have different switching costs. Before the market opens, there was an incumbent who sold to all consumers. We identify the equilibrium both with Stackelberg and Bertrand competition and show how the presence of low switching cost consumers benefits the incumbent, despite the fact that it never sells to any of them.

A real options approach to the baseball game betting

Applications of real options can be found in real assets, but not in sports. This article proposes the real options model and applies it to baseball games, allowing the option to switch between the two teams during the game. We believe this is the first attempt to apply the switching options to the baseball game scheme. To do so, we first design some rules in our assumptions and define variables that are relevant to the baseball options. We combine features of the wager volatility and options to determine the optimal time of team switching, and we find that with low switching cost, the expected investment costs fall and so does risk. The application of switching options to baseball game also presents a feasible method to other sport games.