How Low is a Garanteed-Lowest-Price?
AbstractA game based on the Bertrand duopoly model is constructed to study the effects of price guarantee policies. Before it chooses a list price, a firm can make a binding commitment to match or beat its competitor's price. The effectiveness of these price guarantee policies in facilitating price collusion depends on the solution concept used. Furthermore, there exists an equilibrium in which neither firm offers any price guarantees and each firm sets price equal to marginal cost.
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Bibliographic InfoPaper provided by Carleton University, Department of Economics in its series Carleton Industrial Organization Research Unit (CIORU) with number 93-03.
Length: 25 pages
Date of creation: 1993
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