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Connecting People

Author

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  • M. Ali Choudhary

    (University of Surrey)

Abstract

This paper presents a model in which firms invest on their customer-networks to maintain current and future profits. The model is used to illustrate how the costs of maintaining networks and uncertainties about the customer-networks reduce the importance of making investments on the customer-based. Empirical evidence provides support for the theory.

Suggested Citation

  • M. Ali Choudhary, 2004. "Connecting People," School of Economics Discussion Papers 0404, School of Economics, University of Surrey.
    • Handle: RePEc:sur:surrec:0404
    as

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    File URL: https://repec.som.surrey.ac.uk/2004/DP04-04.pdf
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    References listed on IDEAS

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    1. Haskel, Jonathan & Martin, Christopher & Small, Ian, 1995. "Price, Marginal Cost and the Business Cycle," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 25-41, February.
    2. Konigstein, Manfred & Muller, Wieland, 2001. "Why firms should care for customers," Economics Letters, Elsevier, vol. 72(1), pages 47-52, July.
    3. Julio J. Rotemberg & Michael Woodford, 1991. "Markups and the Business Cycle," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 63-140, National Bureau of Economic Research, Inc.
    4. Homburg, Christian & Rudolph, Bettina, 2001. "Customer satisfaction in industrial markets: dimensional and multiple role issues," Journal of Business Research, Elsevier, vol. 52(1), pages 15-33, April.
    5. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    6. Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 480-493, June.
    7. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-855, December.
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    9. Robert E. Hall, 1986. "Market Structure and Macroeconomic Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 285-338.
    10. M. Ali Choudhary & J. Michael Orszag, 2007. "Costly customer relations and pricing," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 641-661, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Network costs; Uncertainty; Pricing;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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