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.
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Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - 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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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.
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