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Price Setting with Customer Capital: Sales, Teasers, and Rigidity

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  • Leena Rudanko

Abstract

This paper studies price setting in frictional product markets with long-term customer relationships, distinguishing between markets in which such relationships are implicit versus explicit. The theory gives rise to fluctuating prices akin to temporary sales when relationships are implicit and firms set a common price for their customers, and teaser pricing when relationships are explicit and firms are able to differentiate between new and existing customers. Both feature stable regular prices and variable sale/teaser prices when firms face idiosyncratic shocks. Firms accumulate customers gradually, with pricing playing a key role, yet prices remain independent of the firm’s customer base.

Suggested Citation

  • Leena Rudanko, 2025. "Price Setting with Customer Capital: Sales, Teasers, and Rigidity," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 3(2), pages 241-268.
    • Handle: RePEc:ucp:jpemac:doi:10.1086/734999
    DOI: 10.1086/734999
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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