Wednesday, December 26, 2012
Posted by D. Daniel Sokol
Gabor Kezdi (Central European University, IEHAS) and Gergely Csorba (Institute of Economics, IEHAS) are Estimating consumer lock-in effects from firm-level data.
ABSTRACT: This paper proposes a practical method for estimating consumer lock-in effects from firm-level data. The method compares the behavior of already contracted consumers to the behavior of new consumers, the latter serving as a counterfactual to the former. In panel regressions on firms' incoming and quitting consumers, we look at the differential response to price changes and identify the lock-in effect from the difference between the two. We discuss the potential econometric issues and measurement problems and offer solutions to them. We illustrate our method by analyzing the market for personal loans in Hungary and find strong lock-in effects.