On the Incidence and Variety of Low-Price Guarantees
Posted: 6 Sep 2004
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.
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