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How Does Firm Scope Depend On Customer Switching Costs? Evidence From Mobile Telecommunications Markets, Niloofar Abolfathi, Simone Santamaria, Charles Williams

Research Collection Lee Kong Chian School Of Business

This paper examines the relative advantages of single-product and multiproduct firms following changes in customer switching costs. Whereas a single-product firm can closely tailor offerings to customers' needs, a multiproduct firm can create value for customers in the form of flexibility, allowing them to change between product varieties as preferences evolve without needing to switch providers. We argue that this value-creation mechanism is more effective when customers face high switching costs and explore this prediction in the mobile telecommunications sector, using an exogenous policy change (mobile number portability) that suddenly decreases customer switching costs. Our results reveal that when customer …