IDEAS home Printed from https://ideas.repec.org/p/aah/aarhec/2013-12.html
   My bibliography  Save this paper

Price-Matching leads to the Cournot Outcome

Author

Listed:
  • Norovsambuu Tumennasan

    (Department of Economics and Business, Aarhus University)

  • Mongoljin Batsaikhan

    (Georgetown University)

Abstract

We study the effects of price-matching in a duopoly setting in which each firm selects both its price and output, simultaneously. We show that the availability of a pricematching option leads to the Cournot outcome in this setting. This result is a stark contrast to the one obtained in the standard Bertrand competition that the market price in the presence of a price-matching option ranges from the monopolistic price to the Bertrand price. Our result suggests that the effect of price-matching depends on whether the output is a choice variable for the firms.

Suggested Citation

  • Norovsambuu Tumennasan & Mongoljin Batsaikhan, 2013. "Price-Matching leads to the Cournot Outcome," Economics Working Papers 2013-12, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2013-12
    as

    Download full text from publisher

    File URL: ftp://ftp.econ.au.dk/afn/wp/13/wp13_12.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kaplan, Todd R., 2000. "Effective price-matching: a comment," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1291-1294, December.
    2. Tumennasan, Norovsambuu, 2013. "Quantity precommitment and price-matching," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 375-388.
    3. Doyle, Christopher, 1988. "Different selling strategies in Bertrand oligopoly," Economics Letters, Elsevier, vol. 28(4), pages 387-390.
    4. Subhasish Dugar & Todd Sorensen, 2006. "Hassle Costs, Price-Matching Guarantees and Price Competition: An Experiment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(4), pages 359-378, June.
    5. repec:rje:randje:v:37:y:2006:2:p:449-465 is not listed on IDEAS
    6. 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.
    7. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mongoljin Batsaikhan & Norovsambuu Tumennasan, 2018. "Output Decisions and Price Matching: Theory and Experiment," Management Science, INFORMS, vol. 64(8), pages 3609-3624, August.
    2. Tumennasan, Norovsambuu, 2013. "Quantity precommitment and price-matching," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 375-388.
    3. Pinar Akman & Morten Hviid, 2005. "A Most-Favoured-Customer Guarantee with a Twist," Working Papers 05-8, Centre for Competition Policy, University of East Anglia.
    4. 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.
    5. 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.
    6. Enrique Fatás & Nikolaos Georgantz & Juan A. Máñez & Gerardo Sabater, 2013. "Experimental duopolies under price guarantees," Applied Economics, Taylor & Francis Journals, vol. 45(1), pages 15-35, January.
    7. 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.
    8. 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.
    9. Arcan Nalca & Tamer Boyaci & Saibal Ray, 2010. "Competitive price-matching guarantees under imperfect store availability," Quantitative Marketing and Economics (QME), Springer, vol. 8(3), pages 275-300, September.
    10. 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.
    11. Aaron S. Edlin and Eric R. Emch., 1997. "The Welfare Losses from Price Matching Policies," Economics Working Papers 97-257, University of California at Berkeley.
    12. Morten Hviid & Greg Shaffer, 2010. "Matching Own Prices, Rivals' Prices Or Both?," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 479-506, September.
    13. 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.
    14. Louis-André Gérard-Varet & Rodolphe Dos Santos Ferreira & Claude d'Aspremont, 1991. "Concurrence en prix et équilibres cournotiens," Revue Économique, Programme National Persée, vol. 42(6), pages 967-996.
    15. 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.
    16. Arcan Nalca & Tamer Boyaci & Saibal Ray, 2013. "Competitive Price-Matching Guarantees: Equilibrium Analysis of the Availability Verification Clause Under Demand Uncertainty," Management Science, INFORMS, vol. 59(4), pages 971-986, April.
    17. Janssen, Maarten C.W. & Parakhonyak, Alexei, 2013. "Price matching guarantees and consumer search," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 1-11.
    18. Kao, Tina & Menezes, Flavio & Quiggin, John, 2012. "Meeting the Competition: Commitment and Competitive Behavior," Risk and Sustainable Management Group Working Papers 151205, University of Queensland, School of Economics.
    19. Subhasish Dugar, 2007. "Price-Matching Guarantees and Equilibrium Selection in a Homogenous Product Market: An Experimental Study," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(2), pages 107-119, March.
    20. 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.

    More about this item

    Keywords

    Price matching;

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aah:aarhec:2013-12. 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: . General contact details of provider: http://www.econ.au.dk/afn/ .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: http://www.econ.au.dk/afn/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.