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Sunk Prices And Salesforce Competition

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Author Info
Alejandro Corvalán
Pablo Serra ()

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Abstract

This work analyses those industries in which the role of salespersons is to poach clients from rival firms. This is done with a three-stage model where firms decide successively if they enter the market or not, what price to set, and how many salespersons they hire. It is assumed that each consumer is obliged to contract a service unit, but can do so with any firm. The firms can freely choose the price, but must charge same rates to all clients. Under these assumptions it is shown that the possibility of poaching rivals’ clients reduces the intensity of price competition.

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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 216.

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Date of creation: 2005
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Handle: RePEc:edj:ceauch:216

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  1. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
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  2. Solange Berstein & Alejandro Micco, 2002. "Turnover and Regulation: The Chilean Pension Fund Industry," Working Papers Central Bank of Chile 180, Central Bank of Chile. [Downloadable!]
  3. Kyle Bagwell, 2005. "The Economic Analysis of Advertising," Discussion Papers 0506-01, Columbia University, Department of Economics. [Downloadable!]
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  4. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Blackwell Publishing, vol. 51(1), pages 63-81, January. [Downloadable!] (restricted)
  5. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Research series 200404-1, National Bank of Belgium. [Downloadable!]
  6. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank. [Downloadable!]
  7. Blinder, Alan S, 1991. "Why Are Prices Sticky? Preliminary Results from an Interview Study," American Economic Review, American Economic Association, vol. 81(2), pages 89-96, May. [Downloadable!] (restricted)
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  8. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring. [Downloadable!] (restricted)
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