Price-match guarantees and investment incentives

Byung-Cheol Kim and Mishal Ahmed

Information Economics and Policy, 2020, vol. 53, issue C

Abstract: We consider duopoly sequential price competition between a low-cost online firm and a high-cost brick-and-mortar firm that decides whether to price-match the low-cost rival. We study how price-match guarantees affect the incentives of both firms to invest in cost reduction and quality enhancement. We find that price-match guarantees in our model weaken these incentives in most cases. Our research reveals more reasons to suspect that seemingly pro-competitive price-matching by many offline rivals to online sellers may have hidden social costs.

Keywords: Price-match guarantees; Duopoly competition; Investment incentives (search for similar items in EconPapers)
JEL-codes: D4 L13 L4 M2 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167624520301359
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:53:y:2020:i:c:s0167624520301359

DOI: 10.1016/j.infoecopol.2020.100891

Access Statistics for this article

Information Economics and Policy is currently edited by D. Waterman

More articles in Information Economics and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().