Optimal low-price guarantees with anchoring
Many low-price guarantees are offered by small local firms who compete against much larger rivals. The prices of these larger rivals are often set nationally and thus are independent of local market conditions. Our objective in this paper is to explain why small firms in such environments might nevertheless adopt low-price guarantees. We characterize when offering a low-price guarantee is profitable, and assess which form it should take (i.e., conditional on offering a low-price guarantee, should the small firm offer to match or beat its larger competitor’s prices). We also assess the implications thereof (i.e., do the low-price guarantees benefit or harm the small firm’s customers). Copyright The Author(s) 2012
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Individual Marketing with Imperfect Targetability," Marketing Science, INFORMS, vol. 20(1), pages 23-41, November.
- Shaffer, G. & Zhang, Z.J., 1994. "Competitive Coupon Targeting," Papers 94-02, Michigan - Center for Research on Economic & Social Theory.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716.
- Baye, Michael R. & Kovenock, Dan, 1994.
"How to sell a pickup truck : 'Beat-or-pay' advertisements as facilitating devices,"
International Journal of Industrial Organization,
Elsevier, vol. 12(1), pages 21-33, March.
- Baye, M.R. & Kovenock, D., 1992. "How to Sell a Pickup Truck: "Beat-or-Pay" Adverrtisements as Facilitating Devices," Papers 9-92-3, Pennsylvania State - Department of Economics.
- Baye, M.R. & Kovenock, D., 1990. "How To Sell a Pickup Truck : "Beat-or-Pay" Advertisements as Facilitating Devices," Discussion Paper 1990-53, Tilburg University, Center for Economic Research.
- Baye, M.R. & Kovenock, D., 1990. "How To Sell A Pickup Truck: "Beat-Or-Pay" Advertisements As Facilitating Devices," Papers 9053, Tilburg - Center for Economic Research.
- 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.
- 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.
- Schmalensee, Richard., 1980.
"Output and welfare implications of monopolistic third-degree price discrimination,"
1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-47, March.
- Paul W. Dobson & Michael Waterson, 2005. "Chain-Store Pricing Across Local Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 93-119, 03.
- Zhang, Z John, 1995. "Price-Matching Policy and the Principle of Minimum Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(3), pages 287-99, September.
- Iñaki Aguirre & Simon Cowan & John Vickers, 2010.
"Monopoly Price Discrimination and Demand Curvature,"
American Economic Review,
American Economic Association, vol. 100(4), pages 1601-15, September.
- Cowan, Simon & Vickers, John & Aguirre Pérez, Iñaki, 2009. "Monopoly Price Discrimination and Demand Curvature," IKERLANAK 2009-39, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
- Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
- 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.
- 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.
- Hviid, M. & Shaffer, G., 1994.
"Do Low-Price Guarantees Facilitate Collusion?,"
94-01, Michigan - Center for Research on Economic & Social Theory.
- 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.
- Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
- Maria Arbatskaya & Morten Hviid & Greg Shaffer, 1999.
"On the incidence and Variety of Low-Price Guarantees,"
CIE Discussion Papers
1999-10, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- 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 307-32, April.
- 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 365-83, July.
- Arcan Nalca & Tamer Boyaci & Saibal Ray, 2010. "Competitive price-matching guarantees under imperfect store availability," Quantitative Marketing and Economics, Springer, vol. 8(3), pages 275-300, September.
- Greg Shaffer & Z. John Zhang, 2002. "Competitive One-to-One Promotions," Management Science, INFORMS, vol. 48(9), pages 1143-1160, September.
- Pierre Desmet & Emmanuelle Le Nagard, 2005. "Differential Effects of Price-beating Versus Price-matching Guarantee on Retailers' Price Image," Post-Print halshs-00143377, HAL.
- 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.
- Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Consumer Heterogeneity and Competitive Price-Matching Guarantees," Marketing Science, INFORMS, vol. 20(3), pages 300-314, June.
- Edlin, Aaron S. & Emch, Eric R., 1999. "The Welfare Losses from Price-Matching Policies," Berkeley Olin Program in Law & Economics, Working Paper Series qt43b7w47c, Berkeley Olin Program in Law & Economics.
- Greg Shaffer & Z. John Zhang, 1995. "Competitive Coupon Targeting," Marketing Science, INFORMS, vol. 14(4), pages 395-416.
- repec:rje:randje:v:37:y:2006:2:p:449-465 is not listed on IDEAS
- Arcan Nalca & Tamer Boyaci & Saibal Ray, 2010. "Erratum to: Competitive price-matching guarantees under imperfect store availability," Quantitative Marketing and Economics, Springer, vol. 8(3), pages 301-301, September.
When requesting a correction, please mention this item's handle: RePEc:kap:qmktec:v:10:y:2012:i:4:p:393-417. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.