Managing Switching Costs in Multiperiod Procurements with Strategic Buyers
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2005
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This article examines the use of switching costs by long-lived strategic buyers to manage dynamic competition between rival suppliers. The analysis reveals how buyers may employ switching costs to their advantage. We show that when switching costs are high, a buyer may induce suppliers to price more competitively by credibly threatening to replace the incumbent supplier with his rivals. The implications of this finding for adoption of technology and firm organization are explored in settings in which the buyer is integrated with the suppliers and where the buyer is an outsourcer.
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Scholars@Duke
Huseyin Yildirim
Professor Yildirim joined Duke Economics in 2000 after receiving a Ph.D. from the University of Florida. He is an applied microeconomic theorist with broad interests. He has written on such varied topics as dynamic procurement auctions, charitable fundraising, committee design, and, most recently, career concerns in teamwork and tournaments. His work has appeared in top economics journals, including American Economic Review, Review of Economic Studies, Journal of Economic Theory, and RAND Journal of Economics.
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