Do low-price Guarantees facilitate Collusion?
We examine the role low-price guarantees allegedly play in supporting supracompetitive prices. We find that when firms can commit to matching or beating any lower price announced by a competitor, all Nash equilibria yield Bertrand selling prices. This result casts doubt on the robustness of the conclusions of models which restrict attention to meet-the-competition clauses only.
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|Date of creation:||1994|
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