Managing Switching Costs in Multiperiod Procurements with Strategic Buyers
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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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Walter M. Upchurch, Jr. Distinguished Professor of Business Administration
Tracy Lewis is Professor of Economics at the Fuqua School of Business at Duke University, where he holds the Black Chair in Economics. Professor Lewis founded the Innovation Center at the University. Prior to joining the Duke University Faculty in 2003, he served on the faculties at the University of Florida, at the California Institute of Technology, the University of British Columbia, and the University of California, Davis. Aside from academic employment, he has also held positions at the Fed
Professor of Economics
Professor Yildirim's recent research concerns charitable giving, sequencing of bilateral negotiations, and the value of (non-)blind review. His papers have appeared in top economics journals such as American Economic Review, Review of Economic Studies, Journal of Economic Theory, and RAND journal of Economics.
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