The conventional wisdom in economic theory holds that switching costs make markets less competitive. This paper challenges this claim. We find that steady-state equilibrium prices may fall as switching costs are introduced into a simple model of dynamic price competition that allows for...

We develop a model of dynamic advertising and apply it to the problem of optimal advertising scheduling through time. In many industries we observe advertising pulsing, whereby firms systematically switch advertising on and off at a high-frequency. The previous literature has explained such...

This paper considers the decision problem of a firm that is uncertain about the demand, and hence profitability, of a new product. We develop a model of a decision maker who sequentially learns about the true product profitability from observed product sales. Based on the current information,...

There is substantial literature documenting the presence of state-dependent utility with packaged goods data. Typically, a form of brand loyalty is detected whereby there is a higher probability of purchasing the same brand as has been purchased in the recent past. The economic significance of...

This paper develops a framework for measuring “tipping”—the increase in a firm's market share dominance caused by indirect network effects. Our measure compares the expected concentration in a market to the hypothetical expected concentration that would arise in the absence of indirect...

For many consumer packaged goods products, researchers have documented inertia in brand choice, a form of persistence whereby consumers have a higher probability of choosing a product that they have purchased in the past. We show that the finding of inertia is robust to flexible controls for...

For many consumer packaged goods products, researchers have documented a form of state dependence whereby consumers become "loyal" to products they have consumed in the past. That is, consumers behave as though there is a utility premium from continuing to purchase the same product as they have...