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Pro-competitive Price Beating Guarantees: Experimental Evidence

Author

Listed:
  • Enrique Fatás
  • Nikolaos Georgantzís

    ()

  • Juan Máñez
  • Gerardo Sabater-Grande

Abstract

We report experimental results on duopoly pricing with and without price beating guarantees (PBG). In two control treatments, price beating is either imposed as an industry-wide rule or offered as a business strategy. Our major finding is that when price beating guarantees are imposed as a rule or offered as an option, effective prices are equal to or lower than those in a baseline treatment in which price beating is forbidden. Also, when price beating is treated as a business strategy, less than 50% of subjects adopted the guarantee, suggesting that, subjects realize the pro-competitive effects of the guarantee. Copyright Springer 2005

Suggested Citation

  • Enrique Fatás & Nikolaos Georgantzís & Juan Máñez & Gerardo Sabater-Grande, 2005. "Pro-competitive Price Beating Guarantees: Experimental Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 26(1), pages 115-136, November.
  • Handle: RePEc:kap:revind:v:26:y:2005:i:1:p:115-136
    DOI: 10.1007/s11151-004-6614-2
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    File URL: http://hdl.handle.net/10.1007/s11151-004-6614-2
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    References listed on IDEAS

    as
    1. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    2. Kaplan, Todd R., 2000. "Effective price-matching: a comment," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1291-1294, December.
    3. Doyle, Christopher, 1988. "Different selling strategies in Bertrand oligopoly," Economics Letters, Elsevier, vol. 28(4), pages 387-390.
    4. Dobson, Paul W. & Donald Sinclair, C., 1990. "On the possibility of price wars when firms use a 'Tit-for-tat' strategy," Economics Letters, Elsevier, vol. 32(2), pages 115-119, February.
    5. Hviid, M. & Shaffer, G., 1994. "Do Low-Price Guarantees Facilitate Collusion?," Papers 94-01, Michigan - Center for Research on Economic & Social Theory.
    6. Cary A. Deck & Bart J. Wilson, 2003. "Automated Pricing Rules in Electronic Posted Offer Markets," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 208-223, April.
    7. Arbatskaya, Maria, 2001. "Can low-price guarantees deter entry?," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1387-1406, November.
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    Citations

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    Cited by:

    1. Andreas Pollak, 2017. "Do Price-Matching Guarantees with Markups Facilitate Tacit Collusion? Theory and Experiment," Working Paper Series in Economics 93, University of Cologne, Department of Economics.
    2. Mago, Shakun Datta & Pate, Jennifer G., 2009. "An experimental examination of competitor-based price matching guarantees," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 342-360, May.
    3. Enrique Fatás & Nikolaos Georgantzís & Juan A. Máñez & Gerardo Sabater, 2013. "Experimental duopolies under price guarantees," Applied Economics, Taylor & Francis Journals, vol. 45(1), pages 15-35, January.
    4. Enrique Fatas & Juan Mañez, 2007. "Are low-price promises collusion guarantees? An experimental test of price matching policies," Spanish Economic Review, Springer;Spanish Economic Association, vol. 9(1), pages 59-77, March.

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