On the incidence and Variety of Low-Price Guarantees

Maria Arbatskaya, Morten Hviid and Greg Shaffer
Additional contact information
Greg Shaffer: University of Rochester

No 1999-10, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: We provide evidence of the widespread use and variety of low-price guarantees (how common are they; on what products and services are they observed; and what forms do they take), using data obtained from newspaper advertisements in thirty-seven metropolitan areas in the United States. We also consider why firms adopt LPGs. Is it to facilitate tacit collusion, to price discriminate, or do firms have other motivations? Do price-beating guarantees serve the same purpose as price-matching guarantees? We infer the answers to these questions from (a) the extent to which firms place restrictions on their LPGs; (b) whether LPGs apply to advertised prices or actual selling prices, and (c) whether firms with LPGs have higher or lower prices than firms without LPGs. We also uncover aspects of LPGs that have not previously been studied, e.g., 43% of LPGs allow post-sale search. Our findings suggest topics for future research.

Keywords: facilitating practices; low-price guarantees; collusion (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
Pages: 38 pages
Date: 1999-05
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Citations: View citations in EconPapers (1)

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Journal Article: On the Incidence and Variety of Low-Price Guarantees (2004)
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