Duopolistic Competition of Digital Ecosystems-What is Behind the Switching Costs

Abstract

Digital ecosystems as infrastructures that ensure the interaction of producers and consumers have become a new reality of business environment. It raises new questions of modeling competition in information oligopolistic markets, which are dictated primarily by peculiarities of consumer behavior, an increasing role of network effect and switching costs. This paper shows the impact of switching costs in the situation when ecosystem-leader is lowering prices. Approach of joint consideration of the network effect and switching costs is also justified when analyzing the behavior of the segment of consumers prone to periodic provider changes.