IDEAS home Printed from https://ideas.repec.org/a/inm/orinte/v32y2002i5p62-73.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/inte.32.5.62.31
    Download Restriction: no
    File URL: https://libkey.io/10.1287/inte.32.5.62.31?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Cason, Timothy N, 1995. "An Experimental Investigation of the Seller Incentives in the EPA's Emission Trading Auction," American Economic Review, American Economic Association, vol. 85(4), pages 905-922, September.
    2. Cason, Timothy N. & Plott, Charles R., 1996. "EPA's New Emissions Trading Mechanism: A Laboratory Evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 133-160, March.
    3. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70(2), pages 111-111.
    4. Charles R. Plott, 1997. "Laboratory Experimental Testbeds: Application to the PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 605-638, September.
    5. Daniel L. McFadden, 1976. "Quantal Choice Analysis: A Survey," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 363-390, National Bureau of Economic Research, Inc.
    6. Paul J. Brewer & Charles R. Plott, 2002. "A Decentralized, Smart Market Solution to a Class of Back-Haul Transportation Problems: Concept and Experimental Test Beds," Interfaces, INFORMS, vol. 32(5), pages 13-36, October.
    7. Vernon L. Smith, 1964. "Effect of Market Organization on Competitive Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(2), pages 181-201.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. 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.
    3. 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.
    4. 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).
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. Ayelet Israeli, 2018. "Online MAP Enforcement: Evidence from a Quasi-Experiment," Marketing Science, INFORMS, vol. 37(5), pages 710-732, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ortmann, Andreas, 2003. "Charles R. Plott's collected papers on the experimental foundations of economic and political science," Journal of Economic Psychology, Elsevier, vol. 24(4), pages 555-575, August.
    2. Noussair, C.N. & van Soest, D.P., 2014. "Economic Experiments and Environmental Policy : A Review," Other publications TiSEM 5ccc4032-fc1e-453c-9a96-a, Tilburg University, School of Economics and Management.
    3. Hans‐Theo Normann & Roberto Ricciuti, 2009. "Laboratory Experiments For Economic Policy Making," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 407-432, July.
    4. Chaudhuri, Ananish, 2016. "Misbehaving: The Making of Behavioral Economics by Richard H. Thaler, W.W. Norton and Company, New York, 2015, xvi + 415 pp., Hardcover, USD 27.95, ISBN: 978-0-393-08094-0," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 60(C), pages 64-65.
    5. Alt, Marius & Gallier, Carlo & Kesternich, Martin & Sturm, Bodo, 2023. "Collective minimum contributions to counteract the ratchet effect in the voluntary provision of public goods," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    6. Keser Claudia & Gaudeul Alexia, 2016. "Foreword: Special Issue in Honor of Reinhard Selten’s 85th Birthday," German Economic Review, De Gruyter, vol. 17(3), pages 277-283, August.
    7. Brookshire, David S & Burness, H Stuart, 2001. "The Informational Role of the EPA SO2 Permit Auction," Journal of Regulatory Economics, Springer, vol. 20(1), pages 43-60, July.
    8. Ben-David, Shaul & Brookshire, David S. & Burness, Stuart & McKee, Michael & Schmidt, Christian, 1999. "Heterogeneity, Irreversible Production Choices, and Efficiency in Emission Permit Markets," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 176-194, September.
    9. Murphy, James J. & Stranlund, John K., 2007. "A laboratory investigation of compliance behavior under tradable emissions rights: Implications for targeted enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 53(2), pages 196-212, March.
    10. Haoran He & Yefeng Chen, 2021. "Auction mechanisms for allocating subsidies for carbon emissions reduction: an experimental investigation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 387-430, August.
    11. Brannon, James I. & Gorman, Michael F., 2002. "The effects of information costs on search and convergence in experimental markets," Journal of Economic Behavior & Organization, Elsevier, vol. 47(4), pages 375-390, April.
    12. Svendsen, Gert Tinggaard & Christensen, Jan Lien, 1999. "The US SO2 auction: analysis and generalization," Energy Economics, Elsevier, vol. 21(5), pages 403-416, October.
    13. Dijkstra, Bouwe R. & Haan, Marco, 2001. "Sellers' Hedging Incentives at EPA's Emission Trading Auction," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 286-294, May.
    14. Nicolas Vallois & Dorian Jullien, 2017. "Estimating Rationality in Economics: A History of Statistical Methods in Experimental Economics," Working Papers halshs-01651070, HAL.
    15. Cramton, Peter & Kerr, Suzi, 2002. "Tradeable carbon permit auctions: How and why to auction not grandfather," Energy Policy, Elsevier, vol. 30(4), pages 333-345, March.
    16. Requate, Till & Camacho-Cuena, Eva & Kean Siang, Ch'ng & Waichman, Israel, 2019. "Tell the truth or not? The montero mechanism for emissions control at work," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 133-152.
    17. César Martinelli & Jianxin Wang & Weiwei Zheng, 2023. "Competition with indivisibilities and few traders," Experimental Economics, Springer;Economic Science Association, vol. 26(1), pages 78-106, March.
    18. Charles Plott, 2014. "Public choice and the development of modern laboratory experimental methods in economics and political science," Constitutional Political Economy, Springer, vol. 25(4), pages 331-353, December.
    19. Conrad, Klaus & Kohn, Robert E, 1996. "The US market for SO2 permits : Policy implications of the low price and trading volume," Energy Policy, Elsevier, vol. 24(12), pages 1051-1059, December.
    20. Jason F. Shogren, 2002. "Micromotives in Global Environmental Policy," Interfaces, INFORMS, vol. 32(5), pages 47-61, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orinte:v:32:y:2002:i:5:p:62-73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.