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Sticky Prices in Customer Markets *
Author(s) -
CHOUDHARY M. ALI,
KARLSSON THORLAKUR,
ZOEGA GYLFI
Publication year - 2012
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2012.00826.x
Subject(s) - business , asset (computer security) , marketing , loyalty , habit , loyalty business model , economics , psychology , computer security , computer science , service quality , psychotherapist , service (business)
This paper uses survey data on 884 firms from Iceland to test some of the implications of the theory of customer markets proposed by Phelps and Winter (1970). Responses indicate that customers are valuable to firms in accordance with the theory. Firms that list customers as the most valuable asset differ from others in more frequently responding that they would keep prices unchanged when interest rates change; they more frequently mention low prices or habit formation as a source of customer loyalty and they attract customers mainly through marketing and salesmanship. Price changes appear not to be an important policy for attracting and retaining customers.