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According to standard economic wisdom, fixed costs should not matter for pricing decisions. However, outside economics, it is widely accepted that firms need to increase their prices after a fixed cost rise. In this note, we show that a liquidity-constrained firm that maximizes lifetime profits...
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The extant literature on price promotions typically assumes thatconsumers loyal to a brand never switch to a competing … brand, withShilony (1977) and Raju et al (1990) being exceptions. Extendingthe Narasimhan (1988) model, we allow loyal … reservation utility, brand strengthand switcher population. The type of equilibrium for high brand loyaltycorresponds to the one …
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