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The price-matching dilemma
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Constantinou, Evangelos and Bernhardt, Dan (2018) The price-matching dilemma. International Journal of Industrial Organization, 59 . pp. 97-113. doi:10.1016/j.ijindorg.2018.02.002 ISSN 0167-7187.
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Official URL: https://doi.org/10.1016/j.ijindorg.2018.02.002
Abstract
We characterize when strategic considerations of stores to match prices set by rivals on branded goods devolve into a prisoner’s dilemma. We consider a setting where stores also offer generic products, creating incentives to raise prices for branded goods that compete with generics—to shift consumer purchases toward more profitable generics. Price-matching guarantees commit stores not to set high prices for branded goods, thereby attracting more shoppers. When shopping price-elasticities are sufficiently high, a prisoner’s dilemma results.
| Item Type: | Journal Article | ||||||||
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| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Journal or Publication Title: | International Journal of Industrial Organization | ||||||||
| Publisher: | Elsevier | ||||||||
| ISSN: | 0167-7187 | ||||||||
| Official Date: | July 2018 | ||||||||
| Dates: |
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| Volume: | 59 | ||||||||
| Page Range: | pp. 97-113 | ||||||||
| DOI: | 10.1016/j.ijindorg.2018.02.002 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 13 February 2018 | ||||||||
| Date of first compliant Open Access: | 23 March 2020 | ||||||||
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