Hassle costs: the Achilles' heel of price-matching guarantees
UNSPECIFIED. (1999) Hassle costs: the Achilles' heel of price-matching guarantees. JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, 8 (4). pp. 489-521. ISSN 1058-6407Full text not available from this repository.
We show that price-matching guarantees can facilitate monopoly pricing only if firms automatically match prices. If consumers must instead request refunds (thereby incurring hassle costs), we find that any increase in equilibrium prices due to firms' price-matching policies will be small; often, no price increase can be supported. In symmetric markets price-matching guarantees cannot support any rise in prices, even if hassle costs are arbitrarily small. In asymmetric markets, higher prices can be supported, but the prices fall well short of maximizing joint profits. Our model can explain why some firms adopt price-matching guarantees while others do not.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
|Journal or Publication Title:||JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY|
|Publisher:||M I T PRESS|
|Number of Pages:||33|
|Page Range:||pp. 489-521|
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