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Advertising in Customer Markets


  • Sibly, H.


Repeat purchasing customers are more frequently informed of their regular firm's price than are other customers. Consequently customers leave the firm faster following a price increase than they arrive following a price decrease. Previous models treat the rate of customer acquisition following a price fall as exogenous. This paper introduces a two-period customer market model in which a firm may increase the rate of customer acquisition to it through advertising. It is demonstrated that, although the introduction of advertising might reduce the stickiness and the asymmetric response of price that characterizes customer markets, these effects are not eliminated. Copyright 1995 by Scottish Economic Society.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sibly, H., 1993. "Advertising in Customer Markets," Papers 1993-03, Tasmania - Department of Economics.
  • Handle: RePEc:fth:tasman:1993-03

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    References listed on IDEAS

    1. Stiglitz, J E, 1979. "Equilibrium in Product Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 69(2), pages 339-345, May.
    2. McDonald, Ian M, 1987. "Customer Markets, Trade Unions and Stagflation," Economica, London School of Economics and Political Science, vol. 54(214), pages 139-153, May.
    3. Kling, Arnold, 1982. "Imperfect Information and Price Rigidity," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 145-154, January.
    4. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    5. Scitovsky, Tibor, 1978. "Asymmetries in Economics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 25(3), pages 227-237, November.
    6. McDonald, Ian M, 1990. "The Setting of Retail Prices in a Customer Market," The Economic Record, The Economic Society of Australia, vol. 66(195), pages 322-328, December.
    7. Sibly, Hugh, 1992. "Asymmetric Information Flows in Customer Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 44(4), pages 323-341, October.
    8. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-1061, October.
    9. John McMillan & Peter B. Morgan, 1988. "Price Dispersion, Price Flexibility, and Repeated Purchasing," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 883-902, November.
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    Cited by:

    1. Fridriksson, Kari S. & Zoega, Gylfi, 2012. "Advertising as a predictor of investment," Economics Letters, Elsevier, vol. 116(1), pages 60-66.

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    consumption ; pricing;


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