Welfare Effects of Switching Barriers Through Permanence Clauses: Evidence from the Mobiles Market in Colombia

We measure the welfare effects of switching costs through permanence clauses in the mobiles market in Colombia (2014-2016).•We find that fixed-length terms in telecommunications contracts are associated to higher markups in the mobile terminal.•Permanence clauses generate significant switching costs that derive in lower consumer surplus during the period of analysis.•Firm surplus increased due to the elimination of permanence clauses. The variation was perceived mostly by retail sales firms.•We find that in the absence of permanence clauses, consumers would substitute away from prepay to postpay plans.

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