Procrastination Defeats Competition before it begins by Paul Heidhues

Join us for another event in the Microeconomics Research Seminar Series, Spring Term 2026.

Paul Heidhues, from Heinrich-Heine-Universität Düsseldorf, will present this week's Microeconomics Seminar on Procrastination Defeats Competition before it begins.

Abstract

We develop models of markets with procrastinating consumers in which competition operates — or is supposed to operate — both through the initial selection of providers and through the possibility of switching providers. As in other theories, consumers fail to switch to better options after signing up with a firm, weakening price competition at the switching stage. Unlike in other theories, however, consumers are also not keen on starting with the best available offer, falsely thinking that they will switch to better options in the future. This can translate temporary product differentiation into permanently high prices, greatly enhance the price effect of persistent differentiation, or result in high markups even with perfect substitutes. In particular, sign-up deals do not serve their classically hypothesized role of returning ex-post profits to consumers, and often exacerbate the failure of price competition. We complement our analysis with a tailored survey of consumers, confirming the logic of procrastination underlying our model. Consumer procrastination thus emerges as a novel source of competition failure that applies when other theories do not, helping to explain high average prices in many markets with switching costs.

This seminar will be held in the Economics Common Room on Monday 9 March at 10.30am. This event is open to all levels of study and is also open to the public.

To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Microeconomics Research Seminar Series.