Asymmetry of Customer Loss and Recovery under Endogenous Partnerships : Theory and Evidence

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

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

Game theory

Customer loss

Reputation

Nationalekonomi

Economics

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