Measuring the Impact of Price Matching Guarantees on Price Dispersion and Willingness to Pay in Auctions
31 Pages Posted: 10 Mar 2013 Last revised: 20 Nov 2015
Date Written: March 8, 2013
A price matching guarantee (PMG) is a promise to match a competitor’s lower price. A price beating guarantee (PBG) is a promise to beat that price. This study presents a large-scale controlled field experiment involving pairs of simultaneous auctions to examine the impact of the presence versus absence of PMGs and PBGs on consumer search, price dispersion, and willingness to pay for products. Results indicate that consumers switch less between auctions when either a PMG or a PBG is present compared to auction pairs without a price guarantee. Less switching results in higher price dispersion for auctions with either a PMG or a PBG. On average, selling prices are higher in auctions with a PMG or a PBG than in identical auctions without a PMG or a PBG. Bidder entry is higher in auctions that provide a PBG.
Keywords: Auctions, Search, Price matching guarantee, Price beating guarantee
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