Price-Matching Policies: Cut-Throat Competition or Oligopolistic Coordination?

James D. Hess and Eitan Gerstner

No 259438, Department of Economics and Business - Archive from North Carolina State University, Department of Economics

Abstract: Promises by retailers to match the prices of their competitors give an impression of fierce price competition. On the other hand, these policies may deter rivals from cutting prices because the threat of price-matching makes it more likely that market share will not be gained. This paper empirically tests these two conflicting theories using data collected from grocery stores. in a market where several stores had announced that they would match the prices of the low-price supermarket. The evidence supports the theory that pricematching policies help supermarkets avoid price competition and therefore lead to generally higher prices.

Keywords: Demand and Price Analysis; Industrial Organization (search for similar items in EconPapers)
Pages: 34
Date: 1988-06-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncbuar:259438

DOI: 10.22004/ag.econ.259438

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