This article examines the use of switching costs by long-lived strategic buyers to manage dynamic competition between rival suppliers. The analysis reveals how buyers may employ switching costs to their advantage. We show that when switching costs are high, a buyer may induce suppliers to price...

From experience, regulated monopolists learn to employ cost-reducing innovations. We characterize the optimal regulation of an innovating monopolist with unknown costs. Regulatory policy is designed to minimize current costs of service while encouraging development of cost-saving innovations. We...