Pricing and marketing rules with brand loyalty *

  title={Pricing and marketing rules with brand loyalty *},
  author={Salvador Vald{\'e}s-Prieto},
  • Salvador Valdés-Prieto
  • Published 2002
Many firms face a dynamic trade-off: if price is reduced, the firm attracts new customers who will yield profits in the future, but it also forgoes the opportunity to squeeze profits now from loyal customers. This paper identifies a rule that represents the optimal resolution of this trade-off, in terms of an intuitive modification to the static Lerner rule. We find that the “effective” price elasticity depends on the discount rate used by the firm, on the rate of depreciation of the clientele… CONTINUE READING

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