On the Incidence and Variety of Low-Price Guarantees

Posted: 6 Sep 2004

See all articles by Maria Arbatskaya

Maria Arbatskaya

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

This paper provides evidence of the incidence and variety of low-price guarantees (promises to match or beat a rival's price) using data obtained from newspaper advertisements in thirty-seven metropolitan areas in the United States. In all, we have a total of five-hundred and fifteen low-price guarantees in our sample. We document their features, and we infer their motives and effects from these features. The evidence suggests that the majority of low-price guarantees are not consistent with their use as a facilitating device - because they tend to apply only to rival firms' advertised prices or they are associated with high hassle costs. The evidence also suggests that price-beating and price-matching guarantees differ significantly in their features. The former are associated with higher hassle costs, apply disproportionately more to rival firms' advertised prices, and are more likely to allow post-sale search than price-matching guarantees.

Suggested Citation

Arbatskaya, Maria and Hviid, Morten and Shaffer, Greg, On the Incidence and Variety of Low-Price Guarantees. Journal of Law and Economics, Vol. 47, p. 307, 2004, Available at SSRN: https://ssrn.com/abstract=586218

Morten Hviid

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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