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Price Rigidity in Customer Markets Author info | Abstract | Publisher info | Download info | Related research | Statistics Jean-Robert Tyran ()
Elke Renner ()
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Customer markets are characterized by long-term relations between buyers and sellers. Long-term relations evolve if buyers trust sellers to provide high quality and if sellers are trustworthy. However, changes in the terms of this implicit contract may antagonize customers and disrupt the relation. We experimentally show that mutually beneficial long-term relations frequently prevail in markets for experience goods, and that price rigidity after a temporary cost shock is much more pronounced if price increases cannot be justified by cost increases. Hence, long-term relations on customer markets mitigate market failure of the “lemons” type, but are prone to price stickiness.
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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2003 with number
2003-16.
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Length: 41 pages
Date of creation: Sep 2003Date of revision:
Handle: RePEc:usg:dp2003:2003-16Contact details of provider: Postal: Dufourstrasse 50, CH - 9000 St.Gallen Email: Web page: http://www.vwa.unisg.ch/ More information through EDIRC
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Keywords: Customer market ; price stickiness ; customer loyalty ; Other versions of this item:
Find related papers by JEL classification: C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology
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Young, Andrew & Levy, Daniel, 2006.
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"Reciprocity, Social Ties, and Competition in Markets for Experience Goods ,"
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Huck, Steffen & Tyran, Jean-Robert, 2007.
"Reciprocity, social ties, and competition in markets for experience goods ,"
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