Asymmetry of customer loss and recovery under endogenous partnerships: Theory and evidence

Takako Fujiwara-Greve, Henrich R. Greve, Stefan Jonsson

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This article is inspired by real-world phenomena that firms lose customers based on imprecise information and take a long time to recover. If consumers are playing an ordinary repeated game with fixed partners, there is no clear reason why recovery happens slowly. However, if consumers are playing an endogenously repeated game, a class of simple efficient equilibria exhibits the asymmetry of fast loss and slow recovery of customers after a bad signal. Exit is systematic, but formation of a new partnership is random. We also give empirical evidence of our equilibria at an individual-firm level.

Original languageEnglish
Pages (from-to)3-30
Number of pages28
JournalInternational Economic Review
Volume57
Issue number1
DOIs
Publication statusPublished - 2016 Feb 1

ASJC Scopus subject areas

  • Economics and Econometrics

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