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An Experimental Examination of Competitor-Based Price Matching Guarantees

Shakun Datta and Jennifer Offenberg
Authors registered in the RePEc Author Service: Shakun D. Mago ()

MPRA Paper from University Library of Munich, Germany

Abstract: We use experimental methods to demonstrate the anti-competitive potential of price matching guarantees in both symmetric and asymmetric cost duopolies. Our findings establish that when costs are symmetric, price-matching guarantees significantly increase market prices. In markets with cost asymmetries, guaranteed prices remain high relative to prices without the use of guarantees, but the overall ability of price guarantees to act as a collusion facilitating device becomes contingent on the relative cost difference. Lesser use of guarantees, combined with lower average prices and slower convergence to the collusive level, suggest that the mere presence of cost asymmetries may curtail collusive behavior.

Keywords: Price Matching; Price Guarantees; Laboratory; Collusion (search for similar items in EconPapers)
JEL-codes: D43 L13 L4 (search for similar items in EconPapers)
Date: 2003-08-01, Revised 2006-10-22
New Economics Papers: this item is included in nep-com and nep-exp
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Journal Article: An experimental examination of competitor-based price matching guarantees (2009) Downloads
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