Hassle costs: The Achilles' heel of price-matching guarantees

Hviid, Morten and Shaffer, Greg (1999) Hassle costs: The Achilles' heel of price-matching guarantees. Journal of Economics and Management Strategy, 8 (4). pp. 489-521. ISSN 1530-9134

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Abstract

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: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Faculty of Social Sciences > School of Law
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Depositing User: Nicola Secker
Date Deposited: 01 Apr 2011 07:57
Last Modified: 21 Apr 2020 21:22
URI: https://ueaeprints.uea.ac.uk/id/eprint/27844
DOI: 10.1111/j.1430-9134.1999.00489.x

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