Hassle Costs, Price-Matching Guarantees and Price Competition: An Experiment
AbstractWe experimentally investigate whether the collusion-facilitating nature of price-matching guarantees survives the introduction of hassle costs incurred by buyers to enforce these guarantees. The presence of an arbitrarily small number of positive hassle costs buyers may completely undermine incentives for collusion. To evaluate this possibility, we develop four one-shot price competition models that test the hassle cost argument by varying proportions of positive and zero hassle cost buyers present in the market. Although the theory predicts that the competitive price should emerge in equilibrium in all four models, we experimentally find significant price differences. Copyright Springer 2006
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Bibliographic InfoArticle provided by Springer in its journal Review of Industrial Organization.
Volume (Year): 28 (2006)
Issue (Month): 4 (June)
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Web page: http://www.springerlink.com/link.asp?id=100336
Experiment; hassle costs; price-matching guarantees; L11; L12; C91;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
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