Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 123: Airline choice, switching costs and frequent flyer programs
Fredrik Carlsson () and Åsa Löfgren
Additional contact information
Fredrik Carlsson: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Åsa Löfgren: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Abstract: Switching costs are costs that customers face when switching from one firm to another. In markets such as the airline market where repeated purchases are common, switching costs may be substantial. In this paper we estimate the switching costs for domestic airline routes in Sweden between 1992 and 2002. In addition we also test for the determinants of switching costs. In particular we test to what extent factors such as frequent flyer programs and flag carriers have an effect on switching costs. The paper ends with a brief discussion on the welfare consequences of switching cots, where the connection between habit formation and switching costs is discussed.
Keywords: Switching costs; frequent flyer programs; habit formation
14 pages, January 29, 2004
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