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Low-price guarantees and pricing behavior: evidence from hypermarkets in Korea

Author

Listed:
  • Hoe Sang Chung

    (Korea Economic Research Institute)

  • Min Kim

    (University of Maryland)

Abstract

This study examines the relationship between a low-price guarantee and the price competition among three leading hypermarkets in Korea. Using retail price data for individual products, we find that after the guarantee, the price-matching store and its mentioned rival increase their prices while the non-mentioned competitor decreases its prices. The reason for such pricing patterns is discussed as well.

Suggested Citation

  • Hoe Sang Chung & Min Kim, 2016. "Low-price guarantees and pricing behavior: evidence from hypermarkets in Korea," Economics Bulletin, AccessEcon, vol. 36(2), pages 1223-1229.
    • Handle: RePEc:ebl:ecbull:eb-15-00784
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I2-P119.pdf
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    References listed on IDEAS

    as
    1. Arbatskaya, Maria & Hviid, Morten & Shaffer, Greg, 2004. "On the Incidence and Variety of Low-Price Guarantees," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 307-332, April.
    2. 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.
    3. Sridhar Moorthy & Ralph A.Winter, 2006. "Price-Matching Guarantees," RAND Journal of Economics, The RAND Corporation, vol. 37(2), pages 449-465, Summer.
    4. Png, I P L & Hirshleifer, D, 1987. "Price Discrimination through Offers to Match Price," The Journal of Business, University of Chicago Press, vol. 60(3), pages 365-383, July.
    5. Qihong Liu, 2013. "Tacit Collusion With Low-Price Guarantees," Manchester School, University of Manchester, vol. 81(5), pages 828-854, September.
    6. Morten Hviid & Greg Shaffer, 1999. "Hassle Costs: The Achilles' Heel of Price‐Matching Guarantees," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(4), pages 489-521, December.
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    Cited by:

    1. Bottasso, Anna & Marocco, Paolo & Robbiano, Simone, 2020. "Price matching and platform pricing," MPRA Paper 104811, University Library of Munich, Germany.

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    More about this item

    Keywords

    Low-price guarantees; Cartel-facilitating devices; Signals of low prices;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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