Are Low-Price Compromises Collusion Guarantees? An Experimental Test of Price Matching Policies

Enrique Fatas () and Juan A. Mañez

No E2004/33, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: In a symmetric differentiated experimental duopoly we test the ability of Price Matching Guarantees (PMG) to rise prices above the competitive levels. PMG is introduced both as a market institution (the effective selling price is always the lowest posted price) and as a strategic choice so subjects have to decide whether or not to offer it. Our results show that PMG leads to a clear collusive outcome as markets quickly and fully converge to the collusive prediction if PM is imposed as a market institution. If subjects are allowed to decide whether to adopt PMG or not we observe that almost all subjects decide to adopt PMG and prices get very close to the collusive ones.

Keywords: price-matching guarantees; experimental economics (search for similar items in EconPapers)
JEL-codes: C91 L11 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2004
New Economics Papers: this item is included in nep-com and nep-exp
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