Hassle Costs, Price-Matching Guarantees and Price Competition: An Experiment

Subhasish Dugar () and Todd Sorensen

Review of Industrial Organization, 2006, vol. 28, issue 4, 359-378

Abstract: We experimentally investigate whether the collusion-facilitating nature of price-matching guarantees survives the introduction of hassle costs incurred by buyers to enforce these guarantees. The presence of an arbitrarily small number of positive hassle costs buyers may completely undermine incentives for collusion. To evaluate this possibility, we develop four one-shot price competition models that test the hassle cost argument by varying proportions of positive and zero hassle cost buyers present in the market. Although the theory predicts that the competitive price should emerge in equilibrium in all four models, we experimentally find significant price differences. Copyright Springer 2006

Keywords: Experiment; hassle costs; price-matching guarantees; L11; L12; C91 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s11151-006-9103-y

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