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Sunk Prices And Salesforce Competition


  • Alejandro Corvalán
  • Pablo Serra



This work analyses those industries in which the role of salespersons is to poach clients from rival firms. This is done with a three-stage model where firms decide successively if they enter the market or not, what price to set, and how many salespersons they hire. It is assumed that each consumer is obliged to contract a service unit, but can do so with any firm. The firms can freely choose the price, but must charge same rates to all clients. Under these assumptions it is shown that the possibility of poaching rivals’ clients reduces the intensity of price competition.

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  • Alejandro Corvalán & Pablo Serra, 2005. "Sunk Prices And Salesforce Competition," Documentos de Trabajo 216, Centro de Economía Aplicada, Universidad de Chile.
  • Handle: RePEc:edj:ceauch:216

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    References listed on IDEAS

    1. Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 63-81.
    2. Blinder, Alan S, 1991. "Why Are Prices Sticky? Preliminary Results from an Interview Study," American Economic Review, American Economic Association, vol. 81(2), pages 89-96, May.
    3. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    4. Solange Berstein & Alejandro Micco, 2002. "Turnover and Regulation: The Chilean Pension Fund Industry," Working Papers Central Bank of Chile 180, Central Bank of Chile.
    5. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank.
    6. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
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