Answer keyPractice MidtermECON 4559 – Competitive StrategyProf. Moore1. A switching cost is a cost that consumers incur if they change which firm supplies them with agood or service. Switching costs can arise directly from the nature of a product; for example, auser who switches to a different word processing application has to learn how to use it. Firmscan also directly influence whether their products have high or low switching costs.Which of the following describes an example of a firm trying toincreasethe switching cost itscustomers would incur by switching to an alternative supplier?a)Several years ago, Bank of America began to charge a $5 monthly fee to all of itschecking account holders.b)Many credit card companies offer promotions of 0% interest rates for 6 months tocustomers who roll over balances from a different credit card.c)Electronics Arts, a video game publisher, publishes titles for multiple game platforms.
For example, the game “Madden NFL 15” is available for game platforms Xbox One,PlayStation 4, Xbox 360 and PlayStation 3.d)Fitbit is one of several wearable activity trackers that are currently available. Thesedevices record the wearer’s steps taken per day, length of sleep, heartbeat, etc. Thedevices maintain a historical record of the user’s activity and use that information toshow improvements in the user’s fitness and progress toward the user’s health goals.Fitbit uses a proprietary data tracking technology. Users cannot download atransferable version of their fitness history unless they purchase a premiummembership for $49.95.Fitbit has made it costly to switch to an alternative activity tracker because someone who doesso must either abandon their accumulated data in order to switch, or pay $49.95 to switch andtake their data with them. This means a user would have to like another activity tracker betternot only by the purchase price of the new tracker, but also by $49.95 more than that in order forit to be worthwhile to switch.
Get answer to your question and much more
