Article - post-print
We use experimental methods to demonstrate the anti-competitive potential of price matching guarantees in both symmetric and asymmetric cost duopolies. Our findings establish that when costs are symmetric, price-matching guarantees significantly increase market prices. In markets with cost asymmetries, guaranteed prices remain high relative to prices without the use of guarantees, but the overall ability of price guarantees to act as a collusion facilitating device becomes contingent on the relative cost difference. Lesser use of guarantees, combined with lower average prices and slower convergence to the collusive level, suggest that the mere presence of cost asymmetries may curtail collusive behavior.
This is an author-manuscript of an article accepted for publication in Journal Of Economic Behavior & Organization following peer review. The version of record Mago, S. D., & Pate, J. G. (2009). An experimental examination of competitor-based price matching guarantees. Journal Of Economic Behavior And Organization, 70342-360. is available online at: doi:10.1016/j.jebo.2008.06.013.
Mago, S. D., & Pate, J. G. (2009). An experimental examination of competitor-based price matching guarantees. Journal Of Economic Behavior And Organization, 70342-360. doi:10.1016/j.jebo.2008.06.013