Price-Match Announcements in a Consumer Search Duopoly

• Autores: Aleksandr Yankelevich, Brady Vaughan
• Localización: Southern Economic Journal, ISSN 0038-4038, ISSN-e 2325-8012, Vol. 82, Nº. 4, 2016, págs. 1186-1211
• Idioma: inglés
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• Resumen

  • Using a model of sequential search, we show that announcements to price-match raise prices by altering consumer search behavior. First, price-matching diminishes firms’ incentives to lower prices to attract consumers who have no search costs. Second, for consumers with positive search costs, price-matching lowers the marginal benefit of search, inducing them to accept higher prices. Finally, price-matching can lead to asymmetric equilibria where one firm runs fewer sales and both firms tend to offer smaller discounts than in a symmetric equilibrium. Price increases grow in the proportion of consumers who invoke price-matching guarantees and in the level of equilibrium asymmetry.