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Minimum Advertised-Price Policy Rules and Retailer Behavior: An Experiment by Hewlett-Packard

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  • Gary Charness

    (Department of Economics, University of California, Santa Barbara, Santa Barbara, California 93106)

  • Kay-Yut Chen

    (Hewlett-Packard Laboratories, P.O. Box 10301, Palo Alto, California 94303-0890)

Abstract

We tested the effects of various policy rules on retailer behavior in laboratory experiments conducted at Hewlett-Packard Laboratories. Our experimental design models the multifaceted contemporary market for consumer computer products and is quite complex, but we found that participants can make effective decisions and that their behavior is sensitive to variations in policies. Based on our results, Hewlett-Packard changed its policies; for example, it made the consequences for violations forward looking as well as backward looking. This line of research appears promising for complex industrial environments.

Suggested Citation

  • Gary Charness & Kay-Yut Chen, 2002. "Minimum Advertised-Price Policy Rules and Retailer Behavior: An Experiment by Hewlett-Packard," Interfaces, INFORMS, vol. 32(5), pages 62-73, October.
    • Handle: RePEc:inm:orinte:v:32:y:2002:i:5:p:62-73
    DOI: 10.1287/inte.32.5.62.31
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    References listed on IDEAS

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    Cited by:

    1. John Asker & Heski Bar-Isaac, 2020. "Vertical Information Restraints: Pro- and Anticompetitive Impacts of Minimum-Advertised-Price Restrictions," Journal of Law and Economics, University of Chicago Press, vol. 63(1), pages 111-148.
    2. Yuan, Hong & Krishna, Aradhna, 2011. "Price-Matching Guarantees with Endogenous Search: A Market Experiment Approach," Journal of Retailing, Elsevier, vol. 87(2), pages 182-193.
    3. Grewal, Dhruv & Janakiraman, Ramkumar & Kalyanam, Kirthi & Kannan, P.K. & Ratchford, Brian & Song, Reo & Tolerico, Stephen, 2010. "Strategic Online and Offline Retail Pricing: A Review and Research Agenda," Journal of Interactive Marketing, Elsevier, vol. 24(2), pages 138-154.
    4. Ayelet Israeli, 2018. "Online MAP Enforcement: Evidence from a Quasi-Experiment," Marketing Science, INFORMS, vol. 37(5), pages 710-732, September.
    5. Gunessee, Saileshsingh & Lane, Tom, 2023. "Changing perceptions about experimentation in economics: 50 years of evidence from principles textbooks," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    6. Ayelet Israeli & Eric T. Anderson & Anne T. Coughlan, 2016. "Minimum Advertised Pricing: Patterns of Violation in Competitive Retail Markets," Marketing Science, INFORMS, vol. 35(4), pages 539-564, July.
    7. Xiao, Ping & (Jack) Chen, Xinlei & Chen, Yuxin & Lu, Wei, 2021. "Violation behavior in vertical restraint: Empirical analyses in the case of retail price maintenance," International Journal of Research in Marketing, Elsevier, vol. 38(4), pages 953-973.
    8. Saileshsingh Gunessee & Tom Lane, 2020. "Is Economics An Experimental Science? A Textbook Perspective," Discussion Papers 2020-16, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    9. Raj, S.P. & Rhee, Byong-Duk & Sivakumar, K., 2020. "Manufacturer adoption of a unilateral pricing policy in a multi-channel setting to combat customer showrooming," Journal of Business Research, Elsevier, vol. 110(C), pages 104-118.

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