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An Experimental Examination of Competitor-Based Price Matching Guarantees

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  • Datta, Shakun
  • Offenberg, Jennifer

Abstract

We use experimental methods to demonstrate the anti-competitive potential of price matching guarantees in both symmetric and asymmetric cost duopolies. Our findings establish that when costs are symmetric, price-matching guarantees significantly increase market prices. In markets with cost asymmetries, guaranteed prices remain high relative to prices without the use of guarantees, but the overall ability of price guarantees to act as a collusion facilitating device becomes contingent on the relative cost difference. Lesser use of guarantees, combined with lower average prices and slower convergence to the collusive level, suggest that the mere presence of cost asymmetries may curtail collusive behavior.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 575.

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Date of creation: 01 Aug 2003
Date of revision: 22 Oct 2006
Handle: RePEc:pra:mprapa:575

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Keywords: Price Matching; Price Guarantees; Laboratory; Collusion;

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References

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Cited by:
  1. Schwalbe, Ulrich & Baake, Pio, 2013. "Price Guarantees, Consumer Search, and Hassle Costs," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein für Socialpolitik / German Economic Association 80023, Verein für Socialpolitik / German Economic Association.
  2. Pio Baake & Ulrich Schwalbe, 2013. "Price Guarantees, Consumer Search, and Hassle Costs," Discussion Papers of DIW Berlin 1335, DIW Berlin, German Institute for Economic Research.

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