Prices, Exchange Rates and an Optimal Policy of the Central Bank in Customer-Market-Models

Customer loyalty and increasing the market share are focal points in any marketing policy and belong to the most important components of any enterprise strategy. However, the fight for market share is hardly given any attention in macroeconomic theory. The objective of this project is to develop macroeconomic models based on microeconomic studies of the closed and the open economy, which explicitly take into account the interaction between consumers and enterprises fighting for market share. The project examines the possibilities of explaining the rigidity of nominal prices and the incomplete transfer of exchange rate fluctuations on import prices. Further, it aims at making a contribution towards explaining the course of the economic cycle of prices, exchange rates, production and employment. On the basis of such models, the project also issues recommendations with respect to the setting of Central Bank interest rates and money policy.