Strategic short-termism: Implications for the management and acquisition of customer relationships

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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 languageEnglish
Peer-reviewed scientific journalJournal of economic behavior & organization
Volume153
Issue numberSeptember
Pages (from-to)200-222
Number of pages23
ISSN0167-2681
DOIs
Publication statusPublished - 04.08.2018
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • Short-termism
  • Switching cost
  • Duopoly
  • Customer relationship
  • Pricing
  • Delegation

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