Promises to match or beat the competition: Evidence from retail tire prices

Arbatskaya, Maria, Hviid, Morten and Shaffer, Greg (1999) Promises to match or beat the competition: Evidence from retail tire prices. Advances in Applied Microeconomics, 8. pp. 123-138.

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Given the widespread adoption of low-price guarantees and discussion of their anti-competitive effects in the theoretical literature, it is unfortunate that there is little empirical evidence available on the subject. This chapter analyzes the effects of low-price guarantees on advertised tire prices, based on P185/75R14 retail tire prices collected from U.S. Sunday newspapers. We find that although a tire retailer's own price-matching or price-beating guarantee has no significant effect on the retailer's advertised tire price, an increase in the percentage of firms in the market announcing low-price guarantees tends to raise the firm's advertised tire price. In particular, we find that the predicted tire prices are approximately $4 higher (about 10 percent of the average advertised price of a P185/75R14 tire) in markets in which all firms advertise an LPG when compared to markets without any LPGs.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Faculty of Social Sciences > School of Law
UEA Research Groups: Faculty of Social Sciences > Research Groups > Competition, Markets and Regulation
Faculty of Medicine and Health Sciences > Research Centres > Business and Local Government Data Research Centre
Faculty of Social Sciences > Research Groups > Media, Information Technology and Intellectual Property Law
Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User: Julie Frith
Date Deposited: 16 Nov 2010 09:39
Last Modified: 22 Apr 2023 23:52
DOI: 10.1016/s0278-0984(99)08006-2

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