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On the incidence and Variety of Low-Price Guarantees

Author

Listed:
  • Maria Arbatskaya

    (Emory University)

  • Morten Hviid

    (University of Warwick)

  • Greg Shaffer

    (University of Rochester)

Abstract

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.

Suggested Citation

  • 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.
    • Handle: RePEc:kud:kuieci:1999-10
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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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