The value of a "free" customer

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dc.contributor.author Gupta, Sunil
dc.contributor.author Mela, Carl F.
dc.contributor.author Vidal-Sanz, Jose M.
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía de la Empresa
dc.date.accessioned 2009-04-01T17:30:05Z
dc.date.available 2009-04-01T17:30:05Z
dc.date.issued 2009-03
dc.identifier.uri http://hdl.handle.net/10016/3883
dc.description.abstract We study the problem of a firm that faces asymmetric information about the productivity of its potential workers. In our framework, a worker’s productivity is either assigned by nature at birth, or determined by an unobservable initial action of the worker that has persistent effects over time. We provide a characterization of the optimal dynamic compensation scheme that attracts only high productivity workers: consumption –regardless of time period– is ranked according to likelihood ratios of output histories, and the inverse of the marginal utility of consumption satisfies the martingale property derived in Rogerson (1985). However, in the case of i.i.d. output and square root utility we show that, contrary to the features of the optimal contract for a repeated moral hazard problem, the level and the variance of consumption are negatively correlated, due to the influence of early luck into future compensation. Moreover, in this example long-term inequality is lower under persistent private information
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working Paper. Business Economics Series
dc.relation.ispartofseries 09-29-03
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Customer lifetime value
dc.subject.other CRM
dc.subject.other Dynamic programming
dc.subject.other GMM Estimation
dc.title The value of a "free" customer
dc.type workingPaper
dc.subject.eciencia Empresa
dc.rights.accessRights openAccess
dc.identifier.repec wb092903
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