IDEAS home Printed from https://ideas.repec.org/a/eee/telpol/v40y2016i4p307-318.html
   My bibliography  Save this article

An empirical analysis of switching cost in the smartphone market in South Korea

Author

Listed:
  • Park, Yuri
  • Koo, Yoonmo

Abstract

Switching cost is an important factor for policy makers to consider because it sets a higher price for locked-in consumers by making the market less competitive. Though there has been some empirical research analyzing switching costs in the mobile telecommunications market, studies considering the characteristics of smartphones, which have their own operating systems and applications, are still rare. In this study, we conduct a hypothetical conjoint survey to analyze switching cost in the smartphone handset market and derive the cost by using the hierarchical Bayesian multinomial logit model to consider respondents׳ heterogeneity. Switching costs of handsets and OS are empirically estimated, and the magnitudes depend on the levels of searching cost, learning cost, and uncertainty when purchasing new smartphones.

Suggested Citation

  • Park, Yuri & Koo, Yoonmo, 2016. "An empirical analysis of switching cost in the smartphone market in South Korea," Telecommunications Policy, Elsevier, vol. 40(4), pages 307-318.
    • Handle: RePEc:eee:telpol:v:40:y:2016:i:4:p:307-318
    DOI: 10.1016/j.telpol.2016.01.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0308596116000136
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.telpol.2016.01.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Koop,Gary & Poirier,Dale J. & Tobias,Justin L., 2007. "Bayesian Econometric Methods," Cambridge Books, Cambridge University Press, number 9780521671736, June.
    2. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
    3. Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 375-394.
    4. Lee, Jongsu & Kim, Yeonbae & Lee, Jeong-Dong & Park, Yuri, 2006. "Estimating the extent of potential competition in the Korean mobile telecommunications market: Switching costs and number portability," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 107-124, January.
    5. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    6. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 515-539.
    7. Chan,Joshua & Koop,Gary & Poirier,Dale J. & Tobias,Justin L., 2019. "Bayesian Econometric Methods," Cambridge Books, Cambridge University Press, number 9781108437493.
    8. Kim, Moon-Koo & Park, Myeong-Cheol & Jeong, Dong-Heon, 2004. "The effects of customer satisfaction and switching barrier on customer loyalty in Korean mobile telecommunication services," Telecommunications Policy, Elsevier, vol. 28(2), pages 145-159, March.
    9. Nakamura, Akihiro, 2010. "Estimating switching costs involved in changing mobile phone carriers in Japan: Evaluation of lock-in factors related to Japan's SIM card locks," Telecommunications Policy, Elsevier, vol. 34(11), pages 736-746, December.
    10. Kenney, Martin & Pon, Bryan, 2011. "Structuring the Smartphone Industry. Is the Mobile Internet OS Platform the Key?," Discussion Papers 1238, The Research Institute of the Finnish Economy.
    11. Maicas, Juan Pablo & Polo, Yolanda & Javier Sese, F., 2009. "Reducing the level of switching costs in mobile communications: The case of Mobile Number Portability," Telecommunications Policy, Elsevier, vol. 33(9), pages 544-554, October.
    12. Kim, Yeonbae, 2005. "Estimation of consumer preferences on new telecommunications services: IMT-2000 service in Korea," Information Economics and Policy, Elsevier, vol. 17(1), pages 73-84, January.
    13. Klemperer, Paul D, 1987. "Entry Deterrence in Markets with Consumer Switching Costs," Economic Journal, Royal Economic Society, vol. 97(388a), pages 99-117, Supplemen.
    14. Martin Kenney & Bryan Pon, 2011. "Structuring the Smartphone Industry: Is the Mobile Internet OS Platform the Key?," Journal of Industry, Competition and Trade, Springer, vol. 11(3), pages 239-261, September.
    15. Koo, Yoonmo & Kim, Chang Seob & Hong, Junhee & Choi, Ie-Jung & Lee, Jongsu, 2012. "Consumer preferences for automobile energy-efficiency grades," Energy Economics, Elsevier, vol. 34(2), pages 446-451.
    16. Hong, Junhee & Koo, Yoonmo & Jeong, Gicheol & Lee, Jongsu, 2012. "Ex-ante evaluation of profitability and government's subsidy policy on vehicle-to-grid system," Energy Policy, Elsevier, vol. 42(C), pages 95-104.
    17. Jones, Michael A. & Mothersbaugh, David L. & Beatty, Sharon E., 2002. "Why customers stay: measuring the underlying dimensions of services switching costs and managing their differential strategic outcomes," Journal of Business Research, Elsevier, vol. 55(6), pages 441-450, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yoonsun Oh & Jungsuk Oh, 2017. "A critical incident approach to consumer response in the smartphone market: product, service and contents," Information Systems and e-Business Management, Springer, vol. 15(3), pages 577-597, August.
    2. Joachim Freyberger & Bradley J. Larsen, 2022. "Identification in ascending auctions, with an application to digital rights management," Quantitative Economics, Econometric Society, vol. 13(2), pages 505-543, May.
    3. Lukasz Grzybowski & Ambre Nicolle, 2021. "Estimating Consumer Inertia in Repeated Choices of Smartphones," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 33-82, March.
    4. Bölen, Mehmet Cem, 2020. "From traditional wristwatch to smartwatch: Understanding the relationship between innovation attributes, switching costs and consumers' switching intention," Technology in Society, Elsevier, vol. 63(C).
    5. Yoonsun Oh & Jungsuk Oh, 0. "A critical incident approach to consumer response in the smartphone market: product, service and contents," Information Systems and e-Business Management, Springer, vol. 0, pages 1-21.
    6. Benedict Bender, 2020. "The Impact of Integration on Application Success and Customer Satisfaction in Mobile Device Platforms," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 62(6), pages 515-533, December.
    7. Lim, Chulmin & Kim, Seongcheol, 2022. "Why would the users of Google's cloud services intend to switch to alternative services?," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265653, International Telecommunications Society (ITS).
    8. Kim, Junghun & Lee, Hyunjoo & Lee, Jongsu, 2020. "Smartphone preferences and brand loyalty: A discrete choice model reflecting the reference point and peer effect," Journal of Retailing and Consumer Services, Elsevier, vol. 52(C).
    9. Assarzadegan, Parisa & Hejazi, Seyed Reza, 2021. "A game theoretic approach for analyzing the competition between national and store brands by considering store loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    10. Muhammad Tanveer & Harsandaldeep Kaur & George Thomas & Haider Mahmood & Mandakini Paruthi & Zhang Yu, 2021. "Mobile Phone Buying Decisions among Young Adults: An Empirical Study of Influencing Factors," Sustainability, MDPI, vol. 13(19), pages 1-18, September.
    11. Yuen, Kum Fai & Ng, Wei Hong & Wang, Xueqin, 2023. "Switching intention in the online crowdsourced delivery environment: The influence of a platform's technological characteristics and relational bonding strategies," Technology in Society, Elsevier, vol. 72(C).
    12. Rebeca Escobar Briones, 2018. "Impacto de las modificaciones en el proceso de portabilidad numérica sobre los servicios de telecomunicación móvil/The impact on telecommunications services of modifications to mobile number portab," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 33(1), pages 3-28.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Czajkowski, Mikołaj & Sobolewski, Maciej, 2016. "How much do switching costs and local network effects contribute to consumer lock-in in mobile telephony?," Telecommunications Policy, Elsevier, vol. 40(9), pages 855-869.
    2. Florez Ramos, Esmeralda & Blind, Knut, 2020. "Data portability effects on data-driven innovation of online platforms: Analyzing Spotify," Telecommunications Policy, Elsevier, vol. 44(9).
    3. Lucio Fuentelsaz & Juan Pablo Maicas & Yolanda Polo, 2012. "Switching Costs, Network Effects, and Competition in the European Mobile Telecommunications Industry," Information Systems Research, INFORMS, vol. 23(1), pages 93-108, March.
    4. Amante, Ana & Vareda, João, 2010. "Improving consumer mobility in the mobile voice services market: a comprehensive set of remedies," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation 2, International Telecommunications Society (ITS).
    5. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    6. Kim, Dong-hyu & Lee, Heejin, 2016. "Effects of user experience on user resistance to change to the voice user interface of an in‑vehicle infotainment system: Implications for platform and standards competition," International Journal of Information Management, Elsevier, vol. 36(4), pages 653-667.
    7. Rebeca Escobar Briones, 2018. "Impacto de las modificaciones en el proceso de portabilidad numérica sobre los servicios de telecomunicación móvil/The impact on telecommunications services of modifications to mobile number portab," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 33(1), pages 3-28.
    8. Carlos Ocaña Pérez de Tudela & Yolanda Polo & Francisco Javier Sesé, 2009. "Existencia y heterogeneidad de los costes de cambio en la industria de la Telefonía Móvil," Hacienda Pública Española / Review of Public Economics, IEF, vol. 191(4), pages 9-26, December.
    9. Bouckaert, Jan & Degryse, Hans & Provoost, Thomas, 2010. "Enhancing market power by reducing switching costs," Economics Letters, Elsevier, vol. 109(2), pages 131-133, November.
    10. Mark J. Tremblay, 2019. "Platform Competition and Endogenous Switching Costs," Journal of Industry, Competition and Trade, Springer, vol. 19(4), pages 537-559, December.
    11. Stephen Littlechild, 2020. "An Overall Customer Satisfaction score for GB energy suppliers," Working Papers EPRG2027, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    12. Donna, Javier D., 2018. "Measuring Long-Run Price Elasticities in Urban Travel Demand," MPRA Paper 90059, University Library of Munich, Germany.
    13. Ciotti, Fabrizio & Hornuf, Lars & Stenzhorn, Eliza, 2021. "Lock-In Effects in Online Labor Markets," LIDAM Discussion Papers CORE 2021014, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Nogata, Daisuke, 2022. "Determinants of household switching between natural gas suppliers: Evidence from Japan," Utilities Policy, Elsevier, vol. 76(C).
    15. Toker Doganoglu, 2010. "Switching costs, experience goods and dynamic price competition," Quantitative Marketing and Economics (QME), Springer, vol. 8(2), pages 167-205, June.
    16. Mutum, Dilip & Mohd Ghazali, Ezlika & Nguyen, Bang & Arnott, David, 2014. "Online loyalty and its interaction with switching barriers," Journal of Retailing and Consumer Services, Elsevier, vol. 21(6), pages 942-949.
    17. Kate Ho & Joseph Hogan & Fiona Scott Morton, 2017. "The impact of consumer inattention on insurer pricing in the Medicare Part D program," RAND Journal of Economics, RAND Corporation, vol. 48(4), pages 877-905, December.
    18. Theresa Thompson Chaudhry, 2011. "Contracting and Efficiency in the Surgical Goods Cluster of Sialkot, Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 12(1), pages 91-115, March.
    19. repec:ebl:ecbull:v:30:y:2010:i:1:p:437-449 is not listed on IDEAS
    20. Nagengast, Liane & Evanschitzky, Heiner & Blut, Markus & Rudolph, Thomas, 2014. "New Insights in the Moderating Effect of Switching Costs on the Satisfaction–Repurchase Behavior Link," Journal of Retailing, Elsevier, vol. 90(3), pages 408-427.
    21. Peter D. Lunn, 2013. "Telecommunications Consumers: A Behavioral Economic Analysis," Journal of Consumer Affairs, Wiley Blackwell, vol. 47(1), pages 167-189, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:telpol:v:40:y:2016:i:4:p:307-318. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/30471/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.