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ASYMMETRY OF CUSTOMER LOSS AND RECOVERY UNDER ENDOGENOUS PARTNERSHIPS: THEORY AND EVIDENCE*
Author(s) -
FujiwaraGreve Takako,
Greve Henrich R.,
Jonsson Stefan
Publication year - 2016
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12146
Subject(s) - information asymmetry , economics , asymmetry , microeconomics , general partnership , empirical evidence , repeated game , game theory , class (philosophy) , simple (philosophy) , mathematical economics , computer science , finance , physics , epistemology , quantum mechanics , artificial intelligence , philosophy
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.