Optimal low-price guarantees with anchoring

Hviid, Morten and Shaffer, Greg (2012) Optimal low-price guarantees with anchoring. Quantitative Marketing and Economics, 10 (4). pp. 393-417. ISSN 1573-711X

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Abstract

Many low-price guarantees are offered by small local firms who compete against much larger rivals. The prices of these larger rivals are often set nationally and thus are independent of local market conditions. Our objective in this paper is to explain why small firms in such environments might nevertheless adopt low-price guarantees. We characterize when offering a low-price guarantee is profitable, and assess which form it should take (i.e., conditional on offering a low-price guarantee, should the small firm offer to match or beat its larger competitor’s prices). We also assess the implications thereof (i.e., do the low-price guarantees benefit or harm the small firm’s customers).

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 (former - to 2023) 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:	07 Feb 2013 15:50
Last Modified:	21 Apr 2023 04:33
URI:	https://ueaeprints.uea.ac.uk/id/eprint/41142
DOI:	10.1007/s11129-012-9121-z?LI=true#

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