IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00668854.html
   My bibliography  Save this paper

Failing to Suspect Collusion in Price-Matching Guarantees: Consumer Limitations in Game-Theoretic Reasoning

Author

Listed:
  • Subimal Chatterjee

    (School of Management - Binghamton University [SUNY] - SUNY - State University of New York)

  • Timothy B. Heath

    (Miami University - MU - Miami University [Ohio])

  • Suman Basuroy

    (School of Management - SUNY Buffalo - University at Buffalo [SUNY] - SUNY - State University of New York)

Abstract

Marketers often commit to matching competitors' prices by offering price-matching guarantees (PMGs). Theory, however, shows that PMGs can either foster price competition and lower market prices or facilitate price collusion and raise market prices. In 3 experiments, we tested if consumers suspect collusion in such tactics and if this suspicion in turn affects their preferences for PMGs. Experiment 1 showed that consumers prefer markets where sellers offer PMGs over those that do not, suggesting little or no suspicion of collusion. Experiment 2 replicated these findings and extended them by showing that although most consumers prefer PMG markets, consumers higher in need for cognition (NFC) do, consistent with the greater suspicion hypothesized, prefer PMG markets more weakly. However, this weakened preference emerged from concerns over lower product quality in PMG markets more so than expectations of unduly high prices. Experiment 3 then tested the collusive potential of PMGs by placing participants in the role of a government regulator charged with finding collusion in various markets. Regardless of explicit primes and NFC, participants perceived PMGs as competitive devices that reduce prices rather than collusive devices that raise them. In contrast to the assumptions underlying game-theoretic models, consumers often lack the strategic sophistication necessary to detect the collusive potential of PMGs, a limitation that implicates legislation to moderate the use of such devices.

Suggested Citation

  • 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.
  • Handle: RePEc:hal:journl:hal-00668854
    DOI: 10.1207/S15327663JCP1303_07
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

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


    Cited by:

    1. Haruvy, Ernan & Popkowski Leszczyc, Peter T.L., 2016. "Measuring the Impact of Price Guarantees on Bidding in Consumer Online Auctions," Journal of Retailing, Elsevier, vol. 92(1), pages 96-108.
    2. Ho, Hillbun (Dixon) & Ganesan, Shankar & Oppewal, Harmen, 2011. "The Impact of Store-Price Signals on Consumer Search and Store Evaluation," Journal of Retailing, Elsevier, vol. 87(2), pages 127-141.
    3. Dewenter Ralf & Schwalbe Ulrich, 2016. "Preisgarantien im Kraftstoffmarkt," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 17(3), pages 276-288, September.
    4. Waheed Kareem Abdul, 2023. "Probing permanent price reduction strategy of manufacturer brands: pre- and post-purchase perceptions," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(6), pages 455-469, December.
    5. Kukar-Kinney, Monika, 2006. "The role of price-matching characteristics in influencing store loyalty," Journal of Business Research, Elsevier, vol. 59(4), pages 475-482, April.
    6. Dutta, Sujay & Bhowmick, Sandeep, 2009. "Consumer responses to offline and online low price signals: The role of cognitive elaboration," Journal of Business Research, Elsevier, vol. 62(6), pages 629-635, June.
    7. 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.
    8. Dutta, Sujay, 2012. "Vulnerability to Low-Price Signals: An Experimental Study of the Effectiveness of Genuine and Deceptive Signals," Journal of Retailing, Elsevier, vol. 88(1), pages 156-167.

    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:hal:journl:hal-00668854. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.