Price Guarantees, Consumer Search, and Hassle Costs
AbstractThe paper deals with the competitive effects of price guarantees in a spatial duopoly where consumers can search for lower prices but have to incur hassle costs if they want to claim a price guarantee. It is shown that symmetric equilibria with and without price guarantees exist but price guarantees will have no effect on prices if search costs are low, hassle costs are high and the number of uninformed consumers is small. However, when both firms use price guarantees, there also exist payoff-dominant equilibria where both firms use mixed pricing strategies in the form of "high-low" pricing schemes, provided that the search costs are sufficiently high. --
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Bibliographic InfoPaper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80023.
Date of creation: 2013
Date of revision:
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-02 (All new papers)
- NEP-COM-2014-02-02 (Industrial Competition)
- NEP-IND-2014-02-02 (Industrial Organization)
- NEP-MKT-2014-02-02 (Marketing)
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