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Survey Evidence on Customer Markets

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  • Ali Choudhary
  • Thorlakur Karlsson
  • Gylfi Zoega

Abstract

This paper uses survey data from Iceland on 884 firms to test for the theory of customer markets proposed by Phelps and Winter (1970) and Okun (1981). The results provide support for the customer market theory in that managers agree that customers are valuable to firms - they rank them second only to employees - and they use various means of augmenting and retaining their customer base, such as advertising. Surprisingly, however, price setting appears not to be an important ploy for attracting and retaining customers. In this we confirm the earlier results of Lye and Sibly (1994) using Australian data. Instead, advertising and direct contact with customers are listed as significantly more important.

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Bibliographic Info

Paper provided by Department of Economics, Central bank of Iceland in its series Economics with number wp45.

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Date of creation: Nov 2009
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Handle: RePEc:ice:wpaper:wp45

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  26. George A. Akerlof, 2007. "The Missing Motivation in Macroeconomics," American Economic Review, American Economic Association, vol. 97(1), pages 5-36, March.
  27. Kyle Bagwell, 2004. "Countercyclical Pricing in Customer Markets," Economica, London School of Economics and Political Science, vol. 71(284), pages 519-542, November.
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Cited by:
  1. Thorvardur Tjörvi Ólafsson & Ásgerdur Pétursdóttir & Karen Á. Vignisdóttir, . "Price setting in turbulent times. Survey evidence from Icelandic firms," Economics Working Papers 2011-09, School of Economics and Management, University of Aarhus.

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