Protecting Sticky Consumers in Essential Markets

This paper studies regulatory policy interventions that are aimed at protecting sticky consumers who are exposed to the risk of being taken advantage of. We model heterogeneous consumer switching costs alongside asymmetric market shares. This setting encompasses many markets in which established firms are challenged by new entrants. We identify circumstances under which such interventions can be counterproductive: with regard to the stated consumer protection objective and also with regard to the complementary aim to promote competition.