Protecting Vulnerable Consumers in "Switching Markets"

This paper studies regulatory policy interventions aimed at protecting vulnerable consumers who are disengaged and thus exposed to exploitation. We model heterogeneous consumer switching costs alongside asymmetric market shares. This setting encompasses many markets in which established firms are ch...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Beckert, Walter, Siciliani, Paolo
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2018
Subjects
Consumer protection
Consumers
Economic models
Federal regulation
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Summary:This paper studies regulatory policy interventions aimed at protecting vulnerable consumers who are disengaged and thus exposed to exploitation. We model heterogeneous consumer switching costs alongside asymmetric market shares. This setting encompasses many markets in which established firms are challenged by new entrants. We identify circumstances under which such interventions can be counterproductive, both with regard to the stated consumer protection objective and the complementary aim to promote competition.