Experimental duopolies under price guarantees

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Abstract:

In a symmetric differentiated experimental duopoly we test the ability of Price Guarantees (PGs) to raise prices above the competitive levels. Different types of PGs (‘aggressive’ and ‘soft’ price-beating and price-matching) are implemented either as an exogenously imposed market rule or as a business strategy. Our results show that PGs may lead close to the collusive outcome, depending on whether the interaction between duopolists is repeated and provided that the guarantee is not of the ‘aggressive’ price-beating type.

Keywords: C91; L11; experimental duopolies; price guarantees; product differentiation

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2011.568398

Affiliations: 1: School of Economics, University of East Anglia, Norwich NR4 7TJ, UK 2: Department of Economics,Universidad de Granada, Granada, Spain 3: Universidad de Valencia, Economia Aplicada II, Avda. de los Naranjos s/nValencia 46022, Spain 4: Department of Economics,University Jaume I, Av. Vicent Sos Baynat, s/nCastellon 12071, Spain

Publication date: January 1, 2013

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