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Strategic short-termism: Implications for the management and acquisition of customer relationships

Topi Miettinen () and Rune Stenbacka

Journal of Economic Behavior & Organization, 2018, vol. 153, issue C, 200-222

Abstract: We study a duopoly model of history-based price competition with switching costs and demonstrate how strategic history-based pricing induces the owners of the firms to implement managerial short-termism by delegating the pricing decisions to managers with a discount factor lower than that of the owners. Managerial short-termism is a strategic device whereby owners can soften price competition at the stage when customer relationships are established. The degree of short short-termism is shown to depend on the market structure, the intensity of competition and the magnitude of switching costs.

Keywords: Short-termism; Switching cost; Duopoly; Customer relationship; Pricing; Delegation (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.jebo.2018.07.006

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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Handle: RePEc:eee:jeborg:v:153:y:2018:i:c:p:200-222