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Do Low†Price Guarantees Guarantee Low Prices? Evidence from Competition between Amazon and Big†Box Stores

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  • Ran Zhuo

Abstract

It has long been understood in theory that price†match guarantees can be anticompetitive, but to date, scant empirical evidence is available outside of some narrow markets. This paper broadens the scope of empirical analysis, studying a wide range of products sold on a national online market. Using an algorithm that extracts data from charts, I obtain a novel source of data from online price trackers. I examine prices of goods sold on Amazon before and after two big†box stores (Target and Best Buy) announced a guarantee to match Amazon's prices. Employing both difference†in†difference and regression†discontinuity approaches, I robustly estimate a positive causal effect of six percentage points. The effect was heterogeneous, with larger price increases for initially lower†priced items. My results support anticompetitive theories which predict price increases for Amazon, a firm that did not adopt the guarantee, and are consistent with plausible mechanisms for the heterogeneous impact.

Suggested Citation

  • Ran Zhuo, 2017. "Do Low†Price Guarantees Guarantee Low Prices? Evidence from Competition between Amazon and Big†Box Stores," Journal of Industrial Economics, Wiley Blackwell, vol. 65(4), pages 719-738, December.
  • Handle: RePEc:bla:jindec:v:65:y:2017:i:4:p:719-738
    DOI: 10.1111/joie.12154
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    Cited by:

    1. Bottasso, Anna & Marocco, Paolo & Robbiano, Simone, 2020. "Price matching and platform pricing," MPRA Paper 104811, University Library of Munich, Germany.
    2. Cabral, Luis & Duerr, Niklas & Schober, Dominik & Woll, Oliver, 2021. "Price Matching Guarantees and Collusion: Theory and Evidence from Germany," CEPR Discussion Papers 15823, C.E.P.R. Discussion Papers.
    3. Buchali, Katrin & Grüb, Jens & Muijs, Matthias & Schwalbe, Ulrich, 2023. "Strategic Choice of Price-Setting Algorithms," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277695, Verein für Socialpolitik / German Economic Association.
    4. Buchali, Katrin & Grüb, Jens & Muijs, Matthias & Schwalbe, Ulrich, 2023. "Strategic choice of price-setting algorithms," Hohenheim Discussion Papers in Business, Economics and Social Sciences 01-2023, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    5. Kim, Byung-Cheol & Ahmed, Mishal, 2020. "Price-match guarantees and investment incentives," Information Economics and Policy, Elsevier, vol. 53(C).

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