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Advertising in Customer Markets

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  • Sibly, Hugh

Abstract

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.

Suggested Citation

  • Sibly, Hugh, 1995. "Advertising in Customer Markets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(1), pages 66-81, February.
    • Handle: RePEc:bla:scotjp:v:42:y:1995:i:1:p:66-81
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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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