Arm's length relationships without moral hazard

I show that cutting the flow of information between a principal and an agent can increase the power of the incentives of the agent to reveal private information

The value of switching costs

We study the consequences of heterogeneity of switching costs in a dynamic model with free entry and an incumbent monopolist. We identify the equilibrium strategies of the incumbent and of the entrants and show that the strategic interactions are more complex and more interesting than either in static models or in models where all consumers have the same switching costs. In particular, we prove that even low switching cost customers have value for the incumbent: when there are more of them its profits increase. Indeed, their presence hinders entrants who find it more costly to attract high switching cost customers. This leads to different comparative statics: for instance, an increase in the switching costs of all consumers can lead to a decrease in the profits of the incumbent.