Switching Costs
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Title: Switching Costs

Essay Details:

Subject: Technology
Author: James B
Date: December 18, 2015
Level: University
Grade: A
Length: 3 / 767

Essay text:

S/he will switch only if (p - g) + s + p/r < p + p/r (p - g) is what s/he pays now, and s/he also incurs a switching cost s. From second month onward, s/he pays p, the present value of which is p/r. Note that p + p/r is what is costs to stay with the current provider. The minimum g (goodies) that will make the subscriber indifferent between switching to the new provider and staying with the current provider can be found by making the net present value of what it will cost with the new service provider = net present value of what it will cost to stay with the current service provider. That is p – gmin + s + p/r = p + p/r ……… (1) This means gmin = s...

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