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Customer Capital / Francois Gourio, Leena Rudanko.
- Format:
- Book
- Author/Creator:
- Gourio, Francois.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w17191.
- NBER working paper series no. w17191
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2011.
- Summary:
- Firms spend substantial resources on marketing and selling. Interpreting this as evidence of frictions in product markets, which require firms to spend resources on customer acquisition, this paper develops a search theoretic model of firm dynamics in frictional product markets. Introducing search frictions generates long-term customer relationships, rendering the customer base a state variable for firms, which is sluggish to adjust. This affects: the level and volatility of firm investment, sales, profits, value and markups, the timing of firm responses to shocks, and the relationship between investment and Tobin's q. We document support for these predictions in firm-level data from Compustat, using cross-industry variation in selling expenses to quantify differences in the degree of friction across markets.
- Notes:
- Print version record
- July 2011.
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