Hassle Costs, Price-Matching Guarantees and Price Competition: An Experiment

Hassle Costs, Price-Matching Guarantees and Price Competition: An Experiment We experimentally investigate whether the collusion-facilitating nature of price-matching guarantees survives the introduction of hassle costs incurred by buyers to enforce these guarantees. The presence of an arbitrarily small number of positive hassle costs buyers may completely undermine incentives for collusion. To evaluate this possibility, we develop four one-shot price competition models that test the hassle cost argument by varying proportions of positive and zero hassle cost buyers present in the market. Although the theory predicts that the competitive price should emerge in equilibrium in all four models, we experimentally find significant price differences. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Hassle Costs, Price-Matching Guarantees and Price Competition: An Experiment

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Publisher
Springer US
Copyright
Copyright © 2006 by Springer
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-006-9103-y
Publisher site
See Article on Publisher Site

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