Price rigidity in customer markets
- Author(s)
- Jean-Robert Tyran, Renner Elke
- Abstract
Customer markets are characterized by long-term relationships between buyers and sellers that evolve if buyers trust sellers to provide high quality and if sellers are trustworthy. However, changes in the terms of this implicit contract may antagonize customers and disrupt the relationship. We experimentally show that mutually beneficial long-term relationships frequently prevail in markets for experience goods and that price rigidity after a temporary cost shock is much more pronounced if price increases cannot be justified by cost increases. Hence, long-term relationships in customer markets mitigate market failure of the “lemons” type, but are prone to price stickiness.
- Organisation(s)
- Department of Economics, Vienna Center for Experimental Economics
- External organisation(s)
- University of Nottingham
- Journal
- Journal of Economic Behavior & Organization
- Volume
- 55
- Pages
- 575–593
- No. of pages
- 19
- ISSN
- 0167-2681
- DOI
- https://doi.org/10.1016/j.jebo.2003.11.009
- Publication date
- 2004
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502013 Industrial economics, 502045 Behavioural economics
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/price-rigidity-in-customer-markets(cabb8360-d71a-442a-b429-1f76df33e62f).html