Seminar: 'Winning back the unfaithful while exploiting the loyal: Retention offers and heterogeneous switching costs'

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Marco Haan (RUG)

Discussant: Gijsbert Zwart (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject
In this paper we allow firms to make retention offers on a market where they already practice behavior-based price discrimination and where switching costs are present. In addition we take away the, in this setting, common assumption in the literature that switching costs are homogeneous. We show that firms can increase profits in certain situations by making retention offers to consumers that are on the verge of switching. Prices are higher than in the case without retention offers, except for consumers with relatively low switching costs who will pretend to switch in order to get a better price from the firm.

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