Are Low-Price Compromises Collusion Guarantees? An Experimental Test of Price Matching Policies
AbstractIn a symmetric differentiated experimental duopoly we test the ability of Price Matching Guarantees (PMG) to rise prices above the competitive levels. PMG is introduced both as a market institution (the effective selling price is always the lowest posted price) and as a strategic choice so subjects have to decide whether or not to offer it. Our results show that PMG leads to a clear collusive outcome as markets quickly and fully converge to the collusive prediction if PM is imposed as a market institution. If subjects are allowed to decide whether to adopt PMG or not we observe that almost all subjects decide to adopt PMG and prices get very close to the collusive ones.
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Bibliographic InfoPaper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/33.
Length: 7 pages
Date of creation: 2004
Date of revision:
price-matching guarantees; experimental economics;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-13 (All new papers)
- NEP-COM-2004-05-09 (Industrial Competition)
- NEP-EXP-2004-06-13 (Experimental Economics)
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