An empirical analysis of switching cost in the smartphone market in South Korea

Switching cost is an important factor for policy makers to consider because it sets a higher price for locked-in consumers by making the market less competitive. Though there has been some empirical research analyzing switching costs in the mobile telecommunications market, studies considering the characteristics of smartphones, which have their own operating systems and applications, are still rare. In this study, we conduct a hypothetical conjoint survey to analyze switching cost in the smartphone handset market and derive the cost by using the hierarchical Bayesian multinomial logit model to consider respondents׳ heterogeneity. Switching costs of handsets and OS are empirically estimated, and the magnitudes depend on the levels of searching cost, learning cost, and uncertainty when purchasing new smartphones.