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Automated switching services

Author

Listed:
  • Garrod, Luke
  • Li, Ruochen
  • Wilson, Christopher

Abstract

Automated switching services have recently emerged as online intermediaries that use algorithms to facilitate consumer switching. Unlike price comparison websites, these services i) act on behalf of consumers by actively switching them to the cheapest deals, ii) typically charge consumers directly, rather than charging suppliers commission, and iii) often survey across the entire market. We offer the first theoretical analysis of such services. In an oligopoly model with imperfect price information, we characterize an equilibrium with an auto-switching service, and analyze its impact on market outcomes and welfare.

Suggested Citation

  • Garrod, Luke & Li, Ruochen & Wilson, Christopher, 2023. "Automated switching services," MPRA Paper 118492, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:118492
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    References listed on IDEAS

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    1. David Ronayne, 2021. "Price Comparison Websites," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1081-1110, August.
    2. Mark Armstrong, 2015. "Search and Ripoff Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 273-302, November.
    3. Morgan, John & Orzen, Henrik & Sefton, Martin, 2006. "A laboratory study of advertising and price competition," European Economic Review, Elsevier, vol. 50(2), pages 323-347, February.
    4. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    5. Mariano Tappata, 2009. "Rockets and feathers: Understanding asymmetric pricing," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 673-687, December.
    6. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    7. Feldhaus, Christoph & Lingens, Jörg & Löschel, Andreas & Zunker, Gerald, 2022. "Encouraging consumer activity through automatic switching of the electricity contract - A field experiment," Energy Policy, Elsevier, vol. 164(C).
    8. David Ronayne & Greg Taylor, 2022. "Competing Sales Channels with Captive Consumers," The Economic Journal, Royal Economic Society, vol. 132(642), pages 741-766.
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    Cited by:

    1. Anatolii Petrenko & Oleh Boloban, 2023. "Generalized information with examples on the possibility of using a service-oriented approach and artificial intelligence technologies in the industry of e-Health," Technology audit and production reserves, PC TECHNOLOGY CENTER, vol. 4(2(72)), pages 10-17, August.

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    More about this item

    Keywords

    Consumer Switching; Consumer Search; Price Information; Intermediary; Automated; Competition.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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