Asymmetry of Customer Loss and Recovery under Endogenous Partnerships: Theory and Evidence
2016 (English)In: International Economic Review, ISSN 0020-6598, E-ISSN 1468-2354, Vol. 57, no 1, 3-30 p.Article in journal (Refereed) Published
This paper is inspired by real-world phenomena that rms lose customers based on impreciseinformation and take a long time to recover. If consumers are playing an ordinary repeated gamewith xed partners, there is no clear reason why recovery slowly happens. However, if consumers areplaying an endogenously repeated game, a class of simple efficient equilibria exhibits the asymmetryof fast loss of customers after a bad signal and slow recovery. Exit is systematic but formation of anew partnership is random. We also give empirical evidence of our equilibria at an individual-firm level.
Place, publisher, year, edition, pages
2016. Vol. 57, no 1, 3-30 p.
Game theory, Customer loss, Reputation
Research subject Economics
IdentifiersURN: urn:nbn:se:uu:diva-231539DOI: 10.1111/iere.12146ISI: 000370172700001OAI: oai:DiVA.org:uu-231539DiVA: diva2:744884