Abstract
Firms sometimes try to "poach" the customers of their competitors by offering them inducements to switch. We analyze duopoly poaching under both short-term and long-term contracts assuming either that each consumer's brand preferences are fixed over time or that preferences are independent over time. With fixed preferences, short-term contracts lead to poaching and socially inefficient switching. The equilibrium with long-term contracts has less switching than when only short-term contracts are feasible, and it involves the sale of both short-term and long-term contracts. With independent preferences, short-term contracts are efficient, but long-term contracts lead to inefficiently little switching.
Original language | English (US) |
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Pages (from-to) | 634-657 |
Number of pages | 24 |
Journal | RAND Journal of Economics |
Volume | 31 |
Issue number | 4 |
DOIs | |
State | Published - 2000 |
ASJC Scopus subject areas
- Economics and Econometrics