The Economic of Politics and the Politics of Economics

Geoffrey Brennan

Working Papers from Tasmania - Department of Economics

Abstract: A retail market in which customers repeat purchase is considered. Customers are influenced not only by the price set by the firm, but by their level of disenchantment. Disenchantment measures the degree of customer disaffection in the customer-firm relationship. Changes in price lead to proportional changes in disenchantment. It is demonstrated that when customers possess loss aversion with respect to disenchantment levels, the firm's optimal response is characterised by price rigidity.

Keywords: ECONOMIC; POLICY (search for similar items in EconPapers)
JEL-codes: C70 C78 (search for similar items in EconPapers)
Pages: 14 pages
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:fth:tasman:1996-1

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