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Price-matching guarantees: Influences on pricing strategy in a market with asymmetric firms

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  • Koh, Dong-Hee
  • Moon, Junyean
  • Schellhase, Ralf

Abstract

This study analyzes the price effects of price-matching guarantees in a duopoly where consumers are heterogeneous with respect to firm loyalty, and a firm has more loyal customers than the other firm. The results show that equilibrium matching policy and pricing strategy depend on market conditions. Price-matching guarantees can result either in the form of price collusion or price discrimination.

Suggested Citation

  • Koh, Dong-Hee & Moon, Junyean & Schellhase, Ralf, 2012. "Price-matching guarantees: Influences on pricing strategy in a market with asymmetric firms," Journal of Business Research, Elsevier, vol. 65(11), pages 1551-1557.
    • Handle: RePEc:eee:jbrese:v:65:y:2012:i:11:p:1551-1557
    DOI: 10.1016/j.jbusres.2011.02.039
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    References listed on IDEAS

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    1. Arbatskaya, Maria & Hviid, Morten & Shaffer, Greg, 2004. "On the Incidence and Variety of Low-Price Guarantees," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 307-332, April.
    2. Png, I P L & Hirshleifer, D, 1987. "Price Discrimination through Offers to Match Price," The Journal of Business, University of Chicago Press, vol. 60(3), pages 365-383, July.
    3. Morten Hviid & Greg Shaffer, 1999. "Hassle Costs: The Achilles' Heel of Price‐Matching Guarantees," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(4), pages 489-521, December.
    4. Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Consumer Heterogeneity and Competitive Price-Matching Guarantees," Marketing Science, INFORMS, vol. 20(3), pages 300-314, June.
    5. Subimal Chatterjee & Timothy B. Heath & Suman Basuroy, 2003. "Failing to Suspect Collusion in Price-Matching Guarantees: Consumer Limitations in Game-Theoretic Reasoning," Post-Print hal-00668854, HAL.
    6. Juan A. Mañez, 2006. "Unbeatable Value Low‐Price Guarantee: Collusive Mechanism or Advertising Strategy?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 143-166, March.
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    Cited by:

    1. Diana Maria Vrânceanu & Ionel Dumitru, 2016. "An Insight on the Influence of Price-Matching Guarantees on Consumer Behaviour in Romania," International Conference on Marketing and Business Development Journal, The Bucharest University of Economic Studies, vol. 2(1), pages 109-114, July.

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