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

Maria Arbatskaya, Morten Hviid, Greg Shaffer

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)123-138
Number of pages16
JournalAdvances in Applied Microeconomics
Volume8
DOIs
Publication statusPublished - 1999

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