Do low-price Guarantees facilitate Collusion?

Morten Hviid and Greg Shaffer

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: 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.

Date: 1994
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Working Paper: Do Low-Price Guarantees Facilitate Collusion? (1994)
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Persistent link: http://EconPapers.repec.org/RePEc:wrk:warwec:422

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