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The Economic of Politics and the Politics of Economics

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  • Brennan, G.

Abstract

A retail market in which customers repeat purchase is considered. Customers are influenced not only by the price set by the firm, but by their level of disenchantment. Disenchantment measures the degree of customer disaffection in the customer-firm relationship. Changes in price lead to proportional changes in disenchantment. It is demonstrated that when customers possess loss aversion with respect to disenchantment levels, the firm's optimal response is characterised by price rigidity.

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Bibliographic Info

Paper provided by Tasmania - Department of Economics in its series Papers with number 1996-1.

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Length: 14 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:fth:tasman:1996-1

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Postal: UNIVERSITY OF TASMANIA, DEPARTMENT OF ECONOMICS, HOBART TASMANIA 7001 AUSTRALIA.
Phone: +61 3 6226 7672
Fax: +61 3 6226 7587
Web page: http://www.utas.edu.au/economics-finance/
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Keywords: ECONOMIC POLICY;

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