Customer Loyalty and Supplier Quality Competition

Noah Gans ()
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Noah Gans: OPIM Department, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2002, vol. 48, issue 2, 207-221

Abstract: We develop a model of customer choice in response to random variation in quality. The choice model yields closed-form expressions which reflect the effect of competing suppliers' service quality on the long-run fraction of purchases a customer makes at the various competitors. We then use the expressions as the basis of simple normative models for suppliers seeking to maximize their long-run average profits. The results provide insight into the effect of switching behavior on the service levels offered by competing suppliers.

Keywords: Customer Loyalty; Quality Competition; Bayesian Bandit (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (62)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:48:y:2002:i:2:p:207-221

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