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

See all articles by Ernan Haruvy

Ernan Haruvy

University of Texas at Dallas - Naveen Jindal School of Management

Peter T. L. Popkowski Leszczyc

University of Queensland - Business School

Date Written: March 8, 2013

Abstract

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

Suggested Citation

Haruvy, Ernan and Popkowski Leszczyc, Peter T. L., Measuring the Impact of Price Matching Guarantees on Price Dispersion and Willingness to Pay in Auctions (March 8, 2013). University of Alberta School of Business Research Paper No. 2013-703. Available at SSRN: https://ssrn.com/abstract=2230593 or http://dx.doi.org/10.2139/ssrn.2230593

Ernan Haruvy (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Peter T. L. Popkowski Leszczyc

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

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