Price-Matching Guarantees

41 Pages Posted: 4 Dec 2002

See all articles by Sridhar Moorthy

Sridhar Moorthy

University of Toronto - Rotman School of Management

Ralph A. Winter

University of British Columbia (UBC) - Division of Finance

Date Written: August 2002

Abstract

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.

Suggested Citation

Moorthy, Sridhar and Winter, Ralph A., Price-Matching Guarantees (August 2002). Review of Marketing Science (ROMS) Working Paper; Sauder School of Business Working Paper. Available at SSRN: https://ssrn.com/abstract=357600 or http://dx.doi.org/10.2139/ssrn.357600

Sridhar Moorthy (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/~moorthy

Ralph A. Winter

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8339 (Phone)
604-822-8377 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
228
Abstract Views
1,306
rank
134,235
PlumX Metrics