Firm Dynamics With Customer Markets

Topics:
Efficiency
Tags:
Business Operations,
Dynamics,
Finance,
Firms,
Investment,
Research & Development,
Sales,
Sales Force Management,
Sales Strategy
Source:
European University Institute

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Overview: This paper introduces a customer markets model into a model of firm dynamics. The authors assumed that household preferences are characterized by goods-specific (deep) habits. This preference modeling implies that firms are faced with demand functions which relate their current demand to past sales. Firms are assumed to be monopolistically competitive and produce output using inputs of labor and are subject to idiosyncratic productivity shocks. There is free entry into the market but new entrants start their lifecycle with low levels of their customer stock. Incumbents leave the market when their continuation values are below their outside value.

(Is this item miscategorized? Does it need more tags? Let us know.)

Format: PDF | Size: 739KB | Date: May 2007 | Pages: 37

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