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Do Low-Price Guarantees Facilitate Collusion?

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Author Info

  • Hviid, M.
  • Shaffer, G.

Abstract

We examine the role low-price guarantees allegedly play in supporting supracompetitive prices. We find that when firms can commit to matching or beating any lower price announced by a competitor, all Nash equilibria yield Bertrand selling prices. This result casts doubt on the robustness of the conclusions of models which restrict attention to meet-the-competition clauses only.

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Bibliographic Info

Paper provided by Michigan - Center for Research on Economic & Social Theory in its series Papers with number 94-01.

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Length: 10 pages
Date of creation: 1994
Date of revision:
Handle: RePEc:fth:michet:94-01

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Postal: UNIVERSITY OF MICHIGAN, DEPARTMENT OF ECONOMICS CENTER FOR RESEARCH ON ECONOMIC AND SOCIAL THEORY, ANN ARBOR MICHIGAN U.S.A.

Related research

Keywords: pricing ; competition;

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Cited by:
  1. Corts, Kenneth S., 1997. "On the competitive effects of price-matching policies," International Journal of Industrial Organization, Elsevier, vol. 15(3), pages 283-299, May.
  2. Arbatskaya, Maria & Hviid, Morten & Shaffer, Greg, 2006. "On the use of low-price guarantees to discourage price cutting," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1139-1156, November.
  3. Morten Hviid & Greg Shaffer, 2012. "Optimal low-price guarantees with anchoring," Quantitative Marketing and Economics, Springer, vol. 10(4), pages 393-417, December.
  4. Enrique Fatas & Juan Mañez, 2007. "Are low-price promises collusion guarantees? An experimental test of price matching policies," Spanish Economic Review, Springer, vol. 9(1), pages 59-77, March.
  5. Enrique Fatás & Juan A. Mañez, 2004. "Are Low-Price Compromises Collusion Guarantees? An Experimental Test of Price Matching Policies," Economic Working Papers at Centro de Estudios Andaluces E2004/33, Centro de Estudios Andaluces.

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