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On the incidence and Variety of Low-Price Guarantees

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Author Info
Maria Arbatskaya (Emory University)
Morten Hviid (University of Warwick)
Greg Shaffer (University of Rochester)

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Abstract

We provide evidence of the widespread use and variety of low-price guarantees (how common are they; on what products and services are they observed; and what forms do they take), using data obtained from newspaper advertisements in thirty-seven metropolitan areas in the United States. We also consider why firms adopt LPGs. Is it to facilitate tacit collusion, to price discriminate, or do firms have other motivations? Do price-beating guarantees serve the same purpose as price-matching guarantees? We infer the answers to these questions from (a) the extent to which firms place restrictions on their LPGs; (b) whether LPGs apply to advertised prices or actual selling prices, and (c) whether firms with LPGs have higher or lower prices than firms without LPGs. We also uncover aspects of LPGs that have not previously been studied, e.g., 43% of LPGs allow post-sale search. Our findings suggest topics for future research.

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File URL: http://www.econ.ku.dk/CIE/Discussion%20Papers/1999/Pdf%20files/9910.pdf
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Publisher Info
Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 1999-10.

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Length: 38 pages
Date of creation: May 1999
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Handle: RePEc:kud:kuieci:1999-10

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Related research
Keywords: facilitating practices low-price guarantees collusion

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hviid, Morton & Shaffer, Greg, 1994. "Do low-price Guarantees facilitate Collusion?," The Warwick Economics Research Paper Series (TWERPS) 422, University of Warwick, Department of Economics.
    Other versions:
  2. Zhiqi Chen, 1995. "How Low Is a Guaranteed-Lowest-Price?," Canadian Journal of Economics, Canadian Economics Association, vol. 28(3), pages 683-701, August. [Downloadable!] (restricted)
    Other versions:
  3. Baye, M.R. & Kovenock, D., 1992. "How to Sell a Pickup Truck; "Beat-or-Pay" Advertisements as Facilitating Devices"," Purdue University Economics Working Papers 1032, Purdue University, Department of Economics.
    Other versions:
  4. Monika Schnitzer, 1994. "Dynamic Duopoly with Best-Price Clauses," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 186-196, Spring. [Downloadable!] (restricted)
  5. Belton, Terrence M., 1987. "A model of duopoly and meeting or beating competition," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 399-417. [Downloadable!] (restricted)
  6. Png, I P L & Hirshleifer, D, 1987. "Price Discrimination through Offers to Match Price," Journal of Business, University of Chicago Press, vol. 60(3), pages 365-83, July. [Downloadable!] (restricted)
  7. Doyle, Christopher, 1988. "Different selling strategies in Bertrand oligopoly," Economics Letters, Elsevier, vol. 28(4), pages 387-390. [Downloadable!] (restricted)
  8. Ehud Kalai & Mark A. Satterthwaite, 1986. "The Kinked Demand Curve," Discussion Papers 677, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  9. Logan, John W. & Lutter, Randall W., 1989. "Guaranteed lowest prices: do they facilitate collusion?," Economics Letters, Elsevier, vol. 31(2), pages 189-192, December. [Downloadable!] (restricted)
  10. Arbatskaya, Maria, 2001. "Can low-price guarantees deter entry?," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1387-1406, November. [Downloadable!] (restricted)
  11. Corts, Kenneth S., 1995. "On the robustness of the argument that price-matching is anti-competitive," Economics Letters, Elsevier, vol. 47(3-4), pages 417-421, March. [Downloadable!] (restricted)
  12. Aaron Edlin, 1995. "Do Guaranteed-Low-Price Policies Guarantee High Prices, and Can Antitrust Rise to the Challenge," Berkeley Olin Program in Law & Economics, Working Paper Series 1153, Berkeley Olin Program in Law & Economics. [Downloadable!]
  13. Zhang, Z John, 1995. "Price-Matching Policy and the Principle of Minimum Differentiation," Journal of Industrial Economics, Blackwell Publishing, vol. 43(3), pages 287-99, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Datta, Shakun & Offenberg, Jennifer, 2003. "An Experimental Examination of Competitor-Based Price Matching Guarantees," MPRA Paper 575, University Library of Munich, Germany, revised 22 Oct 2006. [Downloadable!]
  2. 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. [Downloadable!]
  3. Maria Arbatskaya, 2005. "Buy Now, Search Later: A Model of Low-Price Guarantees With Post-Purchase Search," Emory Economics 0520, Department of Economics, Emory University (Atlanta). [Downloadable!]
  4. Antonio Cabrales & Sergi Jiménez-Martín, 2007. "The Determinants of Pricing in Pharmaceuticals: Are U.S. Prices Really Higher than Those of Canada?," UFAE and IAE Working Papers 697.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  5. Antonio Cabrales & Sergi Jiménez-Martín, 2008. "The Determinants of Pricing in Pharmaceuticals: Are U.S. prices really so high?," Working Papers 2008-18, FEDEA. [Downloadable!]
  6. Wen Mao, 2005. "Price-matching policy with imperfect information," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(6), pages 367-372. [Downloadable!]
  7. Morten Hviid & Greg Shaffer, 2008. "Matching Own Prices, Rivals' Prices, or Both," Working Papers 08-26, Centre for Competition Policy, University of East Anglia. [Downloadable!]
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