Switching Cost Of Phone Providers

The article, The High Cost Of Loving Your Phone, by Damon Darlin outlines the ideas of how firms in oligopolies and monopolistic competitive markets use high switching cost to ensure that it keeps its customers from switching from itself and to another supplier. It does so by showing that consumers have a hard time switching from one phone provider to another because A, the consumers has non-transferable messages, photos, and a number that holds ‘priceless’ memories, or B, there is a social standard that a customer may be switching from. One the contrary, It also shows an example where a switching cost is eliminated (previously consumers weren’t able to keep their phone number when they switched, but now they are able to), and how a large majority of individual firms responded (They lowered their prices because now the market resemble more of a competitive market rather than a monopolistic competitive market). Ultimately, Loving one’s phone is costly because of the high switching cost associated with phones, and the fact that a new and better phone that a consumer may wish to have (but can’t because of switching cost) may be release from a another providers.

1 Comment »

  1. Nicky Tynan Said,

    December 2, 2016 @ 4:54 pm

    This is a good example of how switching costs give a firm market power.

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