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Price Guarantees, Consumer Search, and Hassle Costs

Ulrich Schwalbe and Pio Baake

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: The paper deals with the competitive effects of price guarantees in a spatial duopoly where consumers can search for lower prices but have to incur hassle costs if they want to claim a price guarantee. It is shown that symmetric equilibria with and without price guarantees exist but price guarantees will have no effect on prices if search costs are low, hassle costs are high and the number of uninformed consumers is small. However, when both firms use price guarantees, there also exist payoff-dominant equilibria where both firms use mixed pricing strategies in the form of "high-low" pricing schemes, provided that the search costs are sufficiently high.

JEL-codes: D43 L13 C72 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:80023

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