The Effects Of Price Matching Guarantees On Prices
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The Effects Of Price Matching Guarantees On Prices
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Author : Subhasish Dugar
language : en
Publisher:
Release Date : 2006
The Effects Of Price Matching Guarantees On Prices written by Subhasish Dugar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This study reports experiments on two competing theories of price-matching guarantees (PMGs). The dominant view (Salop [1986]) in the literature suggests that PMGs can alter pricing incentives of firms and sustain anti-competitive outcome in the market. However, a recent theoretical extension (Hviid and Shaffer [1999]) argues that this anti-competitive outcome can be undermined if buyers incur costs in invoking these guarantees. Therefore, it is natural to wonder how these conclusions stand up empirically. In order to provide empirical evidence on the impact of PMGs on prices, we study a variety of stylized market models that capture the essence of the two theories, obtain testable predictions and lay out the design of the controlled experiment. Results indicate that in the absence of any hassle costs, PMGs can sustain the predicted collusive outcome. On the other hand, the presence of buyers who incur positive hassle costs significantly mitigates, though not fully as theory predicts, the price-facilitating power of PMGs. Our findings indicate that policy makers should heed the potentially anti-competitive effects of PMG related advertisements on prices.
Are Low Prices Compromises Collusion Guarantees An Experimental Analysis Of Price Matching Policies
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Author : Enrique Fatas
language : en
Publisher:
Release Date : 2002
Are Low Prices Compromises Collusion Guarantees An Experimental Analysis Of Price Matching Policies written by Enrique Fatas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
In this paper we experimentally test the ability of Price-Matching Guarantees (PMG) to rise prices above the competitive level. We implement three different treatments of symmetric duopolies to check the effect of PMG both as a market institution and as a business strategy. In the absence of any low-price guarantee, prices get close to the Bertrand-Nash equilibrium although in the 50 rounds of the experiment no full convergence is obtained. The existence of PMG as an institution in a market where firms decide only about prices results in a clear collusive outcome as all markets quickly and fully converge to the collusive prediction. If we allow subjects to decide whether they adopt price matching or not we observe that almost all subjects decide to adopt PMG; prices significantly increases over the first treatment observed prices and are very close to the collusive ones.
Are Low Price Guarantees And Price Matching Guarantees Created Equal
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Author : Swati Verma
language : en
Publisher:
Release Date : 2017
Are Low Price Guarantees And Price Matching Guarantees Created Equal written by Swati Verma and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Marketing categories.
Retailers offer one of Low Price Guarantees (LPGs) or Price Matching Guarantees (PMGs) to signal their price position in the marketplace. Past literature has assumed that both LPG and PMG work similarly as signals of low prices, and consequently, LPG and PMG have been used interchangeably in both research and practice. In my dissertation, I posit that LPG and PMG send out different price signals, and therefore have different effects on consumers' evaluations. Across four studies, I show that LPGs signal lower prices than PMGs, and so LPGs lead to superior evaluations in pre-purchase scenarios, especially for promotion focused consumers actively seeking the lowest price. However, if post-purchase consumers identify a lower price in the marketplace, implying a signal default, then repurchase intentions are less in the case of LPGs, especially among promotion focused consumers. In initial studies, in pre-purchase scenarios, I show that purchase intentions are higher when LPGs (vs. PMGs) are used, with the effect stronger amongst promotion focused (vs. prevention focused) consumers. In a subsequent study, which examines post-purchase scenario, I show that upon signal default, consumers' repurchase intentions are lower when LPGs (vs. PMGs) had been used, and that these effects are stronger amongst promotion focused (vs. prevention focused) consumers. Finally, I run a study wherein the (very) same participants go through a pre-purchase scenario and a post-purchase scenario in succession, and I replicate the above effects.
Price Matching Guarantees And Collusion
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Author : Luís M. B. Cabral
language : en
Publisher:
Release Date : 2021
Price Matching Guarantees And Collusion written by Luís M. B. Cabral and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Consumer behavior categories.
On May 27, 2015, the Shell network of gas stations in Germany introduced a Price Matching Guarantee (PMG) available to its card-carrying members. In the ensuing weeks, a series of attempts at tacit collusion took place, typically with stations increasing prices at around 12 noon by 3 cents. In this paper, we argue that the juxtaposition of these two events is not a mere coincidence. We first present a theoretical model to argue that a PMG can be a collusion enacting practice. We then test various predictions of our theoretical model. Our source of identification is geographical variation in the presence of Shell stations (the chain that enacted the PMG) as well consumer demographics. Our empirical tests are consistent with the theoretical predictions, showing effects that are both statistically and economically significant.
Competitive Price Matching Guarantees
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Author : Arcan Nalca
language : en
Publisher:
Release Date : 2009
Competitive Price Matching Guarantees written by Arcan Nalca and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Measuring The Impact Of Price Matching Guarantees On Price Dispersion And Willingness To Pay In Auctions
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Author : Ernan Haruvy
language : en
Publisher:
Release Date : 2015
Measuring The Impact Of Price Matching Guarantees On Price Dispersion And Willingness To Pay In Auctions written by Ernan Haruvy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
A price matching guarantee (PMG) is a promise to match a competitor's lower price. A price beating guarantee (PBG) is a promise to beat that price. This study presents a large-scale controlled field experiment involving pairs of simultaneous auctions to examine the impact of the presence versus absence of PMGs and PBGs on consumer search, price dispersion, and willingness to pay for products. Results indicate that consumers switch less between auctions when either a PMG or a PBG is present compared to auction pairs without a price guarantee. Less switching results in higher price dispersion for auctions with either a PMG or a PBG. On average, selling prices are higher in auctions with a PMG or a PBG than in identical auctions without a PMG or a PBG. Bidder entry is higher in auctions that provide a PBG.
Price Matching Guarantees And Imperfect Consumer Information
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Author : Jennifer Helen Haydock
language : en
Publisher:
Release Date : 2009
Price Matching Guarantees And Imperfect Consumer Information written by Jennifer Helen Haydock and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Consumer behavior categories.
Price Matching In Online Retail
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Author : Anna Bottasso
language : en
Publisher:
Release Date : 2023
Price Matching In Online Retail written by Anna Bottasso and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
We analyze a sample of consumer-electronics products sold by the US NewEgg online-retailer to study the impact of Price Matching Guarantees (PMGs) policies on prices. By applying aDifference-in-Differences approach,we find that prices of the policy-adopting retailer increase by 4.7% during the policy validity period and up to five days after the treatment, while those of the major non-adopting competitor are not affected. Results are mainly driven by highlyrated, visible and expensive products, while the policy does not affect low-rated, less visible and cheaper ones. Overall findings are consistent with the hypothesis that PMGs act as price discrimination tools.
Hassle Costs Price Matching Guarantees And Price Competition
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Author : Subhasish Dugar
language : en
Publisher:
Release Date : 2005
Hassle Costs Price Matching Guarantees And Price Competition written by Subhasish Dugar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.
In this study, we experimentally investigate whether the collusion-facilitating nature of price-matching guarantees survives the reasonable modification of hassle costs incurred by buyers to enact these guarantees. Hviid and Shaffer [1999] (HS) argue that the presence of an arbitrarily small number of positive hassle costs buyers undermines incentives for collusion in symmetric markets. To evaluate the impact of hassle costs, we develop four stylized one-shot price competition models that have sharp testable predictions. While the first model directly captures the implications of HS, the last three models deal with the theoretical analysis of hassle costs in symmetric markets by introducing varying proportions of positive and zero hassle costs buyers, previously unexplored in the literature. Although theory predicts that the competitive price should emerge in equilibrium in all four models, we find significant price differences in the experiment.
Essays On Consumer Shopping Behavior And Price Dispersion
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Author : Aleksandr Yankelevich
language : en
Publisher:
Release Date : 2011
Essays On Consumer Shopping Behavior And Price Dispersion written by Aleksandr Yankelevich and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Electronic dissertations categories.
Essay 1: "Price-Matching in a Sequential Search Duopoly" While substantial research has tried to determine if price-matching guarantees are anti-competitive, most previous studies have overlooked the effect that these policies have on consumer search behavior. This essay examines how price-matching guarantees affect consumer behavior and prices in a model of sequential price search. By endogenizing consumers' acquisition of price information, I find that price-matching may raise prices in three new ways. First, price-matching diminishes firms' incentives to lower prices to attract consumers who have no cost of search. Second, for consumers with positive search costs, price-matching lowers the marginal benefit of search, inducing them to accept higher prices. Finally, higher prices may come about because price-matching can lead to asymmetric equilibria where one firm runs fewer sales and both firms tend to offer smaller discounts than in a symmetric equilibrium. These price increasing effects grow in proportion to the number of consumers who make use of price-matching guarantees as well as in the amount of asymmetry that prevails in equilibrium. Essay 2: "Asymmetric Sequential Search" (with Carmen Astorne-Figari) Rival firms often find themselves catering to a very different mix of customers from that of their competitors. This can lead to variations in pricing behavior even when other factors, such as product quality and the cost of production, are held constant across firms. In this essay, we use a model of sequential consumer price search to explore how asymmetries in the demand structures across firms impact firm pricing. In our model, a fraction of consumers must pay a cost to search for prices beyond their local firm and firms serve different fractions of local consumers. The price distribution of a firm with more local consumers first order stochastically dominates that of a firm with fewer local consumers and places positive probability on its upper bound. This means that a firm with more local consumers has a higher average price and runs sales less frequently. The frequency of sales diminishes in the number of local consumers, but price dispersion persists even if all consumers are local to a single firm. Moreover, as the fraction of consumers who search without cost increases, firms tend to offer bigger discounts, while the likelihood of a sale may fall. Essay 3: "Energizer: The Bunny or the Battery? Advertising as a Way to Publicize Either the Brand or the Good" (with Carmen Astorne-Figari) Experimental studies and surveys of consumers suggest that an important role of advertising is to convince consumers that they want the product and to buy it from the brand advertising it. However, because of competitive clutter, an advertisement that induces a consumer to enter the market may lead her to purchase from a competing brand. Thus, we can characterize two effects of advertising: (i) an effect that benefits the individual firm by promoting binding between the brand and the advertised good and (ii) a "public good" quality that benefits all producers of the good by inducing additional consumers to enter the market. We analyze these two effects to study the relationship between advertising and market size, price, firm profit and consumer welfare.