Optimal low-price guarantees with anchoring

Morten Hviid and Greg Shaffer ()

Quantitative Marketing and Economics (QME), 2012, vol. 10, issue 4, 393-417

Abstract: Many low-price guarantees are offered by small local firms who compete against much larger rivals. The prices of these larger rivals are often set nationally and thus are independent of local market conditions. Our objective in this paper is to explain why small firms in such environments might nevertheless adopt low-price guarantees. We characterize when offering a low-price guarantee is profitable, and assess which form it should take (i.e., conditional on offering a low-price guarantee, should the small firm offer to match or beat its larger competitor’s prices). We also assess the implications thereof (i.e., do the low-price guarantees benefit or harm the small firm’s customers). Copyright The Author(s) 2012

Keywords: Price-matching policy; Price-beating policy; Price discrimination; L11; L13; L41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:qmktec:v:10:y:2012:i:4:p:393-417

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DOI: 10.1007/s11129-012-9121-z

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