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.
|Peer-reviewed scientific journal||Journal of economic behavior & organization|
|Number of pages||23|
|Publication status||Published - 04.08.2018|
|MoE publication type||A1 Journal article - refereed|
- 512 Business and Management
- Switching cost
- Customer relationship