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Author: Hong Yuan
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
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Book Description
Price-matching guarantees are commonly used by sellers as promises to match the lowest price for an item that a customer can find elsewhere. In this paper, we use a market experiment approach to examine buyer search as well as sellers' pricing decisions in the presence versus absence of Price-Matching Guarantees. We use student subjects as well as real consumers in an interactive laboratory setting to trade with each other, acting as buyers and sellers. Our findings from two experiments indicate that when searchers' demand is more elastic than non-searchers, PMGs can result in more intense price competition, even when sellers are symmetric. Price-Matching sellers benefit from converting more consumers into searchers who buy a larger quantity at a lower price. The lower (average) market prices also benefit buyers. These implications should be of great interest to researchers, practitioners, and public policymakers.
Author: Hong Yuan
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
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Book Description
Price-matching guarantees are commonly used by sellers as promises to match the lowest price for an item that a customer can find elsewhere. In this paper, we use a market experiment approach to examine buyer search as well as sellers' pricing decisions in the presence versus absence of Price-Matching Guarantees. We use student subjects as well as real consumers in an interactive laboratory setting to trade with each other, acting as buyers and sellers. Our findings from two experiments indicate that when searchers' demand is more elastic than non-searchers, PMGs can result in more intense price competition, even when sellers are symmetric. Price-Matching sellers benefit from converting more consumers into searchers who buy a larger quantity at a lower price. The lower (average) market prices also benefit buyers. These implications should be of great interest to researchers, practitioners, and public policymakers.
Author: Juncai Jiang
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
Price-matching guarantees (PMGs) are offered in a wide array of product categories in retail markets. PMGs offer consumers the assurance that, should they find a lower price elsewhere within a specified period after purchase, the retailer will match that price and refund the price difference. The goal of this study is to explain the following stylized facts: (1) many retailers that operate both online and offline implement PMG offline but not online; (2) the practices of PMG vary considerably across retail categories; and (3) some retailers launch specialized websites that automatically check competitors' prices for consumers after purchase. To this end, we build a sequential search model that endogenizes consumers' pre- and post-purchase search decisions. We find that PMG expands retail demand but intensifies price competition on two dimensions. PMG drives retailers to offer deeper promotions because it increases the overall extent of consumer search, which we call the primary competition-intensifying effect. We also find a new secondary competition-intensifying effect, which results from endogenous consumer search. As deeper promotions incentivize consumers to continue price search, retailers are forced to lower the “regular” price to deter consumers from searching. The strength of the secondary competition-intensifying effect increases with the ratio of product valuation to search cost, which explains the variation in PMG practices online vs. offline and across retail categories. We show that an asymmetric equilibrium exists such that one retailer offers PMG while the other does not. In this equilibrium the PMG retailer may benefit from launching a price check website to facilitate consumers' post-purchase search.
Author: Joydeep Srivastava
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Many retailers offer a price-matching guarantee that promises to pay consumers the difference if they find a lower price elsewhere. This article proposes that the effectiveness of a price-matching guarantee as a signal of low store prices depends on individuals' beliefs about the degree to which other consumers in the market engage in price search, enforce price-matching guarantees, or both. Consistent with signaling theory, results of a survey and two experimental studies demonstrate that market level factors affect consumer beliefs about the extent to which others engage in price search and thereby the effectiveness of price-matching guarantees in lowering perceptions of store prices. The implications of the findings for retail strategy are discussed along with directions for future research.
Author: Jennifer Helen Haydock
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 0
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Author: Nicholas H. Lurie
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In 3 experiments, we show that price-matching guarantees affect the process through which consumers translate price information into subjective judgments. In Experiment 1, we find that price-matching guarantees appear to change the standard used in price evaluation by raising consumers' estimates of the lowest and average prices in the market. This leads consumers to perceive products and stores that offer price-matching guarantees as less expensive. In Experiment 2, we show that evaluations of product price information are affected by the presence of a price-matching guarantee only when consumers do not know the range of market prices. In Experiment 3, we extend these findings to show that consumer evaluations of the cost of products in a store, inferred on the basis of store characteristics, are also influenced by the presence of a price-matching guarantee.
Author: Monika Kukar-Kinney
Publisher:
ISBN:
Category :
Languages : en
Pages : 418
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Author: Sridhar Moorthy
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Are price-matching guarantees anticompetitive? This paper examines the incentives for price-matching guarantees in markets where information about prices is costly. Under some conditions the conventional explanation of price-matching announcements as facilitating collusion finds support, and is even strengthened. But our model provides an additional explanation for the practice. A price-matching guarantee may be a credible and easily understood means of communicating to uninformed consumers that a firm is low-priced. The credibility of the signal to uninformed consumers is assured by the behaviour of informed consumers. We contrast the testable implications of our model with those of the anticompetitive theories and discuss supportive evidence from an illustrative sample of retailers.
Author: Arcan Nalca
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Price-matching guarantees (PMGs) involve a retailer matching the lower price of a competitor for an identical product. In practice, retailers often make such guarantees contingent on verification of product availability at the competitor location and decline the price-match request if the product is not available there. In this paper, we model a multi-stage duopoly game where the stochastic customer demand is sensitive to both price and product availability. The objective is to understand why and when retailers should verify availability as a price-match prerequisite, and how it affects the intensity of price and inventory competition. Our results establish that the verification of availability may have pro-competitive or anti-competitive effects depending on how cognizant customers are to the implications of demand uncertainty. We first analyze a model where customers are mindful of the fact that retailers will decline their price-match requests based on the unavailability of the product at the competing retailer while making store choice decisions, and show that verification of availability is not the equilibrium strategy since it (weakly) increases the intensity of price and inventory competition between the retailers, increases consumers' surplus, and decreases retail profits. We show that one possible reason for retailers to offer availability contingent PMG is that customers concentrate on price and discount the effects of product availability while making store decisions. In fact, if customers ignore product availability issues while making store choices, then verification of availability is indeed the equilibrium strategy for retailers since it increases prices and order quantities, allows them to price discriminate against customers, decreases consumers' surplus, and increases retail profits. Finally, we show that the above results are valid irrespective of whether customers are homogenous or heterogenous in terms of the price information they have prior to their store visits.
Author: Andrew Cohen
Publisher:
ISBN:
Category : Price discrimination
Languages : en
Pages : 48
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Author: Subhasish Dugar
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Price-matching guarantees have been alleged to sustain collusive prices in a homogenous product market. Theories in this literature also suggest that there exists multiple equilibria (i.e., a set of price equilibria between the competitive and the monopoly price) when all sellers adopt these guarantees in such a market. Theoretical prediction in this case fails to pin down the actual behavior of players a priori. This paper illustrates the essential role of controlled experiment in testing the collusive theory of price matching guarantees and thereby shedding light on the embedded equilibrium selection problem. In particular, this paper studies two highly stylized market models, obtains testable predictions and lays out the design of the controlled experiment. Results indicate that these guarantees facilitate collusion among sellers and thus solve the equilibrium selection problem considerably.
