Unbeatable Value Low‐Price Guarantee: Collusive Mechanism or Advertising Strategy?

Juan A. Mañez

Journal of Economics & Management Strategy, 2006, vol. 15, issue 1, 143-166

Abstract: This paper investigates the effects of a low‐price guarantee (price‐beating guarantee) on the patterns of price setting of three supermarkets using micro‐level price data. Following recent theoretical developments, the paper analyzes the ability of low‐price guarantees to sustain anticompetitive prices. My empirical analysis suggests instead that this low‐price guarantee may serve as an advertising device to signal low prices. The supermarket offering the low‐price guarantee, aware of its price advantage in a subset of products, uses it to signal low prices to induce consumers to switch supermarkets.

Date: 2006
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https://doi.org/10.1111/j.1530-9134.2006.00095.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:15:y:2006:i:1:p:143-166

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