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Sales and Promotions: A More General Model

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Author Info
Il-Horn Hann (University of Southern California)
Kai-Lung Hui (National University of Singapore)
Sang-Yong Tom Lee (Hanyang University)
Ivan P.L. Png (National University of Singapore)

Additional information is available for the following registered author(s):

Abstract

We embed the Varian (1980) model in a broader setting that considers how switcher/loyal customer segments are determined. Generally, customer acquisition is deterministic while pricing is randomized. The equilibrium outcome depends on the timing of customer acquisition relative to pricing. If sellers acquire customers before setting prices, the unique equilibrium is asymmetric. If sellers acquire customers and set prices simultaneously, the unique equilibrium is symmetric. Our results provide a fundamental justification for previous analyses that variously assumed the outcome to be asymmetric or symmetric. The comparative statics for the asymmetric and symmetric equilibria are identical.

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Publisher Info
Paper provided by EconWPA in its series Industrial Organization with number 0508014.

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Length: 21 pages
Date of creation: 30 Aug 2005
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Handle: RePEc:wpa:wuwpio:0508014

Note: Type of Document - pdf; pages: 21
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Related research
Keywords: competition pricing customer acquisition

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan Png, 2005. "Consumer Privacy and Marketing Avoidance," Industrial Organization 0503009, EconWPA. [Downloadable!]
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