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.
Original language | English |
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Peer-reviewed scientific journal | Journal of Economic Behavior & Organization |
Volume | 153 |
Issue number | September |
Pages (from-to) | 200-222 |
Number of pages | 23 |
ISSN | 0167-2681 |
DOIs | |
Publication status | Published - 04.08.2018 |
MoE publication type | A1 Journal article - refereed |
Keywords
- 512 Business and Management
- Short-termism
- Switching cost
- Duopoly
- Customer relationship
- Pricing
- Delegation