switching costs

CFA Level II
#1

I know this questions has been posted before but I can’t seem to find the answer in the posts at the moment. Can someone please explain to me what switching costs are and its implications? Thanks

#2

it’s how easy it is to switch from one product to another. take, i dunno, toothpaste. pretty easy for you to switch brands. if that’s the case and low switching costs, good for you the buyer, bad for the supplier in the industry- gives them less power. something with a high switching cost would be good for the supplier, bad for the consumer… b/c it’s hard for you to switch products so they can probably still charge you more and you wouldn’t switch.

#3

say you have your cell phone, cable internet, and cable TV with comcast. they also give you 5% off for every additional service you bundle with them after 1 (10% total.) also your cell phone is on a 2 year contract. you can tell it would be a big pain in the ass to switch to a different firm

#4

What’s your switching costs to another analyst forum? Chad should know switching costs very well.

#5

Thanks guys for clearing it up!