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On the incidence and Variety of Low-Price Guarantees

  • Maria Arbatskaya

    (Emory University)

  • Morten Hviid

    (University of Warwick)

  • Greg Shaffer

    (University of Rochester)

We provide evidence of the widespread use and variety of low-price guarantees (how common are they; on what products and services are they observed; and what forms do they take), using data obtained from newspaper advertisements in thirty-seven metropolitan areas in the United States. We also consider why firms adopt LPGs. Is it to facilitate tacit collusion, to price discriminate, or do firms have other motivations? Do price-beating guarantees serve the same purpose as price-matching guarantees? We infer the answers to these questions from (a) the extent to which firms place restrictions on their LPGs; (b) whether LPGs apply to advertised prices or actual selling prices, and (c) whether firms with LPGs have higher or lower prices than firms without LPGs. We also uncover aspects of LPGs that have not previously been studied, e.g., 43% of LPGs allow post-sale search. Our findings suggest topics for future research.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 1999-10.

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Length: 38 pages
Date of creation: May 1999
Date of revision:
Handle: RePEc:kud:kuieci:1999-10
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