Finance:Captive market

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Short description: Concept in economics

A captive market is a market where the potential consumers face a severely limited number of competitive suppliers; their only choices are to purchase what is available or to make no purchase at all.[1]

Consumers can become captive through switching costs, even when competing products are available. These costs can include replacing incompatible equipment, learning to use a different product, or giving up benefits tied to repeat purchases. Switching costs give suppliers market power over existing customers, while the prospect of repeat business can encourage competition to attract new customers through low introductory prices.[2]

Economic models also distinguish captive consumers, who consider purchasing from only one seller, from consumers who compare offers from several sellers. Both groups can be present in the same market.[3]

Examples

Cinema concession stands provide an example: once inside a theatre, patrons form a captive market for refreshments such as popcorn, soft drinks and sweets.[4]

Airport shops and restaurants serve passengers waiting for flights. Reporting on Philadelphia International Airport in 2016, Billy Penn described passengers on layovers and those arriving early for departures as a captive market for retailers.[5]

During the 2020 NBA Bubble, Jimmy Butler sold coffee for US$20 a cup.[6] Sports Illustrated later described his customers as a captive clientele.[7]

Campus food purchasing has also been studied in this context. A study of 951 undergraduates at a public university in New England identified high campus food prices and limited transport to grocery shops as barriers faced by students experiencing food insecurity.[8]

Students buying assigned textbooks have been described as a captive market because they cannot choose which titles they are required to use.[9]

In March 2026, the Australian Competition and Consumer Commission (ACCC) reported that the Qantas Group, including Jetstar, provided over two-thirds of Australian domestic passenger services and, with Virgin Australia, accounted for over 95 per cent of the market. Many regional and remote routes had only one airline group. Some low-demand routes operate under exclusive rights awarded by government tender to support service viability.[10]

Frequent-flyer programs, including Qantas Frequent Flyer, can also influence customers’ choice of airline. The ACCC’s 2019 review identified switching costs associated with progress towards rewards and with status benefits, although membership is non-exclusive.[11] Its 2025 aviation report recalled an earlier assessment that frequent-flyer programs did not appear to create a significant barrier to entry.[12]

Captive audiences also offer opportunities for advertising revenue. In 2014, travel journalist David Flynn described Qantas’s expansion of advertising aboard aircraft and in its domestic lounges as a way of earning revenue from captive travellers.[13]

In US freight transport, customers who consider themselves dependent on a single railway are known as "captive shippers". The Congressional Research Service notes that these customers typically ship bulky goods that cannot economically be transported by truck and lack viable access to transport by barge.[14]

In academic publishing, individual journals contain material that is not interchangeable with that of other journals. In 2012, University of Pittsburgh library director Rush Miller described commercial journal publishing, including Elsevier, as a captive market because libraries needing a particular journal had to accept its price or forgo access.[15]

Telephone services in US jails and prisons have been described as a captive market because institutions arrange exclusive contracts with providers, leaving prisoners and their families unable to choose a competing telephone company.[16]

A historical example is Murphy and Company in nineteenth-century Lincoln, New Mexico. The business paid local farmers and ranchers in credit redeemable at its store, creating a captive market for its goods.[17]

In a study of English and German professional football, André Bühler discussed the description of committed supporters as captive consumers: their loyalty to a club makes them unwilling to switch merely because another club offers cheaper tickets or merchandise.[18]

See also

References

  1. ↑ "Captive". Cambridge University Press. Business English. https://dictionary.cambridge.org/dictionary/english/captive. 
  2. ↑ Klemperer, Paul (1995). "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade". The Review of Economic Studies 62 (4): 515–539. doi:10.2307/2298075. 
  3. ↑ Armstrong, Mark; Vickers, John (2019). "Discriminating against Captive Customers". American Economic Review: Insights 1 (3): 257–272. doi:10.1257/aeri.20180581. 
  4. ↑ Peter, J. Paul; Olson, Jerry C. (2010). Consumer Behavior & Marketing Strategy (9th ed.). McGraw-Hill/Irwin. p. 274. ISBN 978-0-07-340476-9. 
  5. ↑ Henninger, Danya (2016-05-07). "How Philly International Airport picks its restaurants and shops". Billy Penn. https://billypenn.com/2016/05/07/how-philly-international-airport-picks-its-restaurants-and-shops/. 
  6. ↑ "Jimmy Butler is charging $20 a cup from his NBA bubble coffee shop" (in en). ESPN. 2020-08-16. https://www.espn.com/nba/story/_/id/29674158/jimmy-butler-charging-20-cup-nba-bubble-coffee-shop. 
  7. ↑ Nadkarni, Rohan (1 April 2022). "Jimmy Butler, the NBA's Biggest Coffee Aficionado". Sports Illustrated. https://www.si.com/nba/2022/04/01/jimmy-butler-heat-big-face-coffee. 
  8. ↑ Zigmont, Victoria A; Anziano, Jennifer; Schwartz, Elizabeth; Gallup, Peggy (2023). "Captive Market Pricing and Lack of Transportation: A Survey of Undergraduate Food Insecurity at a Public University in New England". American Journal of Health Promotion 37 (3): 313–323. doi:10.1177/08901171221127006. ISSN 0890-1171. PMID 36112939. 
  9. ↑ Cuillier, Cheryl (2018). "Inclusive Access: Who, What, When, Where, How, and Why?". in Jensen, Kristi; Nackerud, Shane. The Evolution of Affordable Content Efforts in the Higher Education Environment: Programs, Case Studies, and Examples. University of Minnesota Libraries Publishing. Chapter 16, “Level of Cost Savings”. https://open.lib.umn.edu/affordablecontent/chapter/inclusive-access-who-what-when-where-how-and-why/. Retrieved 18 September 2026. 
  10. ↑ Australian Competition and Consumer Commission (2026-03-11). Submission to the Productivity Commission inquiry into the determinants of regional airfares (Report). pp. 1, 21. https://www.accc.gov.au/system/files/accc-submission-productivity-commission-inquiry-into-the-determinants-into-regional-airfares.pdf. Retrieved 18 September 2026. 
  11. ↑ Australian Competition and Consumer Commission (December 2019). Customer loyalty schemes: Final report (Report). p. 93. https://www.accc.gov.au/system/files/Customer%20Loyalty%20Schemes%20-%20Final%20Report%20-%20December%202019.PDF. Retrieved 18 September 2026. 
  12. ↑ Australian Competition and Consumer Commission (August 2025). Domestic airline competition in Australia (Report). pp. 21, 25. https://www.accc.gov.au/system/files/accc-domestic-airline-competition-australia-august-2025.pdf. Retrieved 18 September 2026. 
  13. ↑ Flynn, David (15 April 2014). "Qantas to ramp up advertising inflight, and in lounges too". Executive Traveller. https://www.executivetraveller.com/qantas-to-ramp-up-advertising-inflight-and-in-lounges-too. 
  14. ↑ The Surface Transportation Board (STB): Background and Current Issues (Report). Congressional Research Service. 9 September 2025. “Authority to Set Maximum Rates”. R47013. https://www.congress.gov/crs-product/R47013. Retrieved 18 September 2026. 
  15. ↑ Barlow, Kimberly K. (2012-02-09). "Protest launched against journal publisher". University Times (University of Pittsburgh). https://www.utimes.pitt.edu/archives/?p=19679. 
  16. ↑ Rose, Joel (2015-10-21). "FCC moves to cut high cost of prisoner's calls". NPR. https://www.wbez.org/news/2015/10/21/fcc-moves-to-cut-high-cost-of-prisoners-calls. 
  17. ↑ Mead, Christopher C.. "Lincoln Historic District". SAH Archipedia. University of Virginia Press. https://sah-archipedia.org/buildings/NM-01-027-0147. Retrieved 18 September 2026. 
  18. ↑ Bühler, André W. (2006). "Football as an international business – an Anglo-German comparison". European Journal for Sport and Society 3 (1): 25–41. doi:10.1080/16138171.2006.11687777. 



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