Price matching guarantees and consumer search

Janssen, Maarten; Parakhonyak, Alexei

doi:10.1016/j.ijindorg.2012.10.001

Cited by 26 publications

(22 citation statements)

References 12 publications

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“…The idea is that, when consumers are heterogeneous, PMG can be used to price discriminate one consumer type over the others. Janssen and Parakhonyak (2013) and Yankelevich and Vaughan (2016) both investigate the price discrimination role of PMG within the endogenous search framework. In Janssen and Parakhonyak (2013), some consumers with high search cost do not search in equilibrium but are able to passively receive a price quote after purchase.…”

mentioning

confidence: 99%

“…Janssen and Parakhonyak (2013) and Yankelevich and Vaughan (2016) both investigate the price discrimination role of PMG within the endogenous search framework. In Janssen and Parakhonyak (2013), some consumers with high search cost do not search in equilibrium but are able to passively receive a price quote after purchase. In addition, consumers do not know whether retailers offer PMG at the time of purchase; thus, PMG does not affect consumers' search and purchase decisions.…”

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Price-Matching Guarantees with Endogenous Consumer Search

2017

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Abstract. Price-matching guarantees (PMGs) are offered in a wide array of product categories in retail markets. PMGs offer consumers the assurance that, should they find a lower price elsewhere within a specified period after purchase the retailer will match that price and refund the price difference. The goal of this study is to explain the following stylized facts: (1) many retailers that operate both online and offline implement PMG offline but not online; (2) the practices of PMG vary considerably across retail categories; and (3) some retailers launch specialized websites that automatically check competitors' prices for consumers after purchase. To this end, we build a sequential search model that endogenizes consumers' pre-and postpurchase search decisions. We find that PMG expands retail demand but intensifies price competition on two dimensions. PMG drives retailers to offer deeper promotions because it increases the overall extent of consumer search, which we call the primary competition-intensifying effect. We also find a new secondary competition-intensifying effect, which results from endogenous consumer search. As deeper promotions incentivize consumers to continue price search, retailers are forced to lower the "regular" price to deter consumers from searching. The strength of the secondary competition-intensifying effect increases with the ratio of product valuation to search cost, which explains the variation in PMG practices online versus offline and across retail categories. We show that an asymmetric equilibrium exists such that one retailer offers PMG while the other does not. In this equilibrium, the PMG retailer may benefit from launching a price check website to facilitate consumers' postpurchase search.History: Accepted by J. Miguel Villas-Boas, marketing.

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Price-Matching Guarantees with Endogenous Consumer Search

2017

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“…Low price guarantee signals create increased credibility amongst consumers in that the perception of a false offer shall have an economic cost for the company making it and therefore, shall have a greater influence on the perceived value of the consumer and future buying intentions (Erevelles, Roy & Yip, 2001;Biswas et al, 2002;Dutta & Biswas, 2005;Lurie & Srivastava, 2005;Dutta & Bhomwich, 2009;Hardesty et al, 2012;Janssen & Parakhonyak, 2013). Thus, when the selling companies are faced with the choice of not making any sort of offer regarding low prices or, in the case that they do, selecting the most appropriate, the following hypotheses have been created:…”

Section: Low Price Signallingmentioning

confidence: 99%

“…Specifically, low price signals (always low prices or low price guarantees) have become increasingly popular in both online and offline commerce (Dutta and Bhowmick, 2009). Numerous works have analyzed some of the different low price offers made by sellers: always low prices (ALP) and low price guarantees, which either match their competitor's price-price matching guarantee (PM) or beat the competitor's offer-price beating guarantee (PB) (Alford & Biswas, 2002;Dutta & Biswas, 2005;Dutta, Biswas & Grewal, 2007;Dutta, 2012;Janssen & Parakhonyak, 2013). However, we are unaware of studies that examine which of these offers are more convenient for consumers and generate better economic results for companies.…”

Section: Introductionmentioning

confidence: 99%

Do Low Price Signals Influence Online Purchases of Tourist Accommodation Services? The Moderating Role of Gender

Vega¹,

Gil²,

Vecchio³

2014

BMR

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Based on an experimental design applied to online purchases of hotel bookings, this study analyzes the influence of three low price signals and the distribution channel on perceived value and behavioral intentions. Positive influences on perceived value and buying intention were found for price beating guarantee and always low price signals but the distribution channel was only found to have an effect on behavioral intentions. Also, it has been seen that gender plays a moderating role on both perceived value and buying intention. Finally, the most effective low price differ in function of the type of enterprise that is transmitting the information to the consumers: price beating guarantee is the best option for hotel website but always low price guarantee is better for electronic intermediaries.

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“…In a recent article, Janssen and Parakhonyak () also found that price‐matching guarantees raise prices through their effects on consumer search. However, there are a number of important differences between this article and Janssen and Parakhonyak (), the foremost of which is that whereas we analyze a setting where price‐matching policies are advertised by firms and invoked by consumers prior to purchase, Janssen and Parakhonyak explore the impact of posterior price‐matching in which some consumers can get a discounted price if after having purchased from a firm that turns out to offer a price‐match guarantee, these consumers acquire additional price information (e.g., from friends) that a different firm offers a lower price.…”

Section: Introductionmentioning

confidence: 97%

Price-Match Announcements in a Consumer Search Duopoly

Yankelevich

Vaughan²

2015

Southern Economic Journal

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Using a model of sequential search, we show that announcements to price-match raise prices by altering consumer search behavior. First, price-matching diminishes firms incentives to lower prices to attract consumers who have no search costs. Second, for consumers with positive search costs, price-matching lowers the marginal benefit of search, inducing them to accept higher prices. Finally, price-matching can lead to asymmetric equilibria where one firm runs fewer sales and both firms tend to offer smaller discounts than in a symmetric equilibrium. Price increases grow in the proportion of consumers who invoke price-matching guarantees and in the level of equilibrium asymmetry.

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Price matching guarantees and consumer search

Cited by 26 publications

References 12 publications

Price-Matching Guarantees with Endogenous Consumer Search

Price-Matching Guarantees with Endogenous Consumer Search

Do Low Price Signals Influence Online Purchases of Tourist Accommodation Services? The Moderating Role of Gender

Price-Match Announcements in a Consumer Search Duopoly

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