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.

A Model of Cause Lawyering

This paper is an economic analysis of cause lawyering, in which lawyers seek social change through the courts. The lawyer’s litigation strategy consists of deciding how many steps in the law to ask the court to move at a single moment. We find that more intense advocates prefer to ask for a series of small steps to move the law. We also investigate how the Supreme Court’s doctrine responds to advocacy in lower courts. We find that when facing intense advocates, a Supreme Court is more likely to issue constraining doctrine. We link the findings from the model to the National Association for the Advancement of Colored People’s litigation strategy for eradicating the doctrine of separate but equal

The value of incumbency for heterogeneous platforms

We study the dynamics of competition in a model with network effects, an incumbent and entry. We propose a new way of representing the strategic advantages of incumbency in a static model and embed it in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two platforms emerge at equilibrium; explore the reasons why these inefficient equilibria arise; compute the profits of the incumbent and demonstrate that the incumbency advantage does not improve much, if at all, when going from a static to a dynamic framework

The value of incumbency for heterogeneous platforms

We study the dynamics of competition in a model with network effects, an incumbent and entry. We propose a new way of representing the strategic advantages of incumbency in a static model and embed it in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two platforms emerge at equilibrium; explore the reasons why these inefficient equilibria arise; compute the profits of the incumbent and demonstrate that the incumbency advantage does not improve much, if at all, when going from a static to a dynamic framework

A Model of Cause Lawyering

This paper is an economic analysis of cause lawyering, in which lawyers seek social change through the courts. The lawyer’s litigation strategy consists of deciding how many steps in the law to ask the court to move at a single moment. We find that more intense advocates prefer to ask for a series of small steps to move the law. We also investigate how the Supreme Court’s doctrine responds to advocacy in lower courts. We find that when facing intense advocates, a Supreme Court is more likely to issue constraining doctrine. We link the findings from the model to the National Association for the Advancement of Colored People’s litigation strategy for eradicating the doctrine of separate but equal

Migration between platforms

We study incumbency advantage in platform industries, where the utility of participating in a platform is increasing in the mass of users participating in that platform. Individuals receive stochastic opportunities to migrate from an incumbent to a new (entrant) platform, which they can accept or wait until the next opportunity arises. Individuals have an incentive to delay migration until enough other users have migrated, which provides a micro-foundation for incumbency advantage. When users obtain more frequent migration opportunities, the cost of delaying migration is reduced, so incumbency advantage increases. Migration technologies that allow for large groups of individuals to migrate in a short period of time (i.e., coordination) are also associated with higher incumbency advantage. There always exists some capacity constraint by the entrant which increases the cost of delaying migration and thereby reduces incumbency advantage. Multi-homing reduces incumbency advantage but does not eliminate it. When individuals have heterogeneous preferences for the two platforms, there can be welfare losses due to excessive segregation of individuals across the platforms

The value of switching costs

We study a dynamic model with an incumbent monopolist and entry in every subsequent period. We first show that if all consumers have the same switching cost, then the intertemporal profits of the incumbent are the same as if there was only one period. We then study the consequences of heterogeneity of switching costs. We prove that even low switching cost customers have value for the incumbent: when there are more of them its profits increase as their presence hinders entrants who find it more costly to attract high switching cost customers

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