Search and Switching Costs: A Market Experiment

Abstract We investigate the interplay of search and switching costs in determining suboptimal market outcomes. Relying on the theoretical framework provided by Wilson (2012), we test whether search or switching costs have a greater detrimental impact on competition and on the mechanisms behind it. Our results show that market outcomes crucially depend on buyers’ strategy, and that, unlike theoretical predictions, switching costs may impact prices and welfare more than search costs under some circumstances.