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Customer Relationship and Sales

Shouyong Shi

No 88, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: I analyze a search equilibrium of a large market where customer relationship arises endogenously together with service priority and sales. A buyer is related to a seller if he just purchased from the seller, and the relationship is broken if the buyer fails to buy from the seller. I prove that there exists a unique equilibrium where it is optimal for a buyer to make repeat purchases from the related seller and optimal for a seller to give service priority to the related buyer. Moreover, a related seller posts a (high) regular price, and an unrelated seller posts a (low) sale price with the intention to revert to the regular price once he gains a relationship. The fraction of related sellers is endogenous. I examine how market conditions affect the stock of relationships, markups, the size and the duration of a sale.

Date: 2013
New Economics Papers: this item is included in nep-com, nep-dge, nep-mic and nep-mkt
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Related works:
Journal Article: Customer relationship and sales (2016) Downloads
Working Paper: Customer Relationship and Sales (2013) Downloads
Working Paper: Customer Relationship and Sales (2011) Downloads
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