Matching Own Prices, Rivals' Prices or Both?

28 Pages Posted: 7 Sep 2010

See all articles by Morten Hviid

Morten Hviid

University of East Anglia - Centre for Competition Policy (CCP); University of East Anglia (UEA) - Norwich Law School

Greg Shaffer

University of Rochester - Simon Business School

Abstract

Many retailers promise that they will not be undersold by rivals and extend their promise to include their own future prices. That is, many retailers combine elements of both price-matching guarantees and retroactive most-favored-customer clauses. This is puzzling because the extant literature has shown that each practice independently has the potential to facilitate supracompetitive prices, and thus one might think the two practices are substitutes. In this paper, we show that price-matching guarantees and most-favored-customer clauses complement each other when offered unilaterally by a single firm and can lead to higher prices than either one could have facilitated by itself.

Suggested Citation

Hviid, Morten and Shaffer, Greg, Matching Own Prices, Rivals' Prices or Both?. The Journal of Industrial Economics, Vol. 58, No. 3, pp. 479-506, September 2010, Available at SSRN: https://ssrn.com/abstract=1672916 or http://dx.doi.org/10.1111/j.1467-6451.2010.00423.x

Morten Hviid (Contact Author)

University of East Anglia - Centre for Competition Policy (CCP) ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

University of East Anglia (UEA) - Norwich Law School ( email )

Norwich NR4 7TJ, Norfolk
United Kingdom

Greg Shaffer

University of Rochester - Simon Business School ( email )

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