Price-Match Announcements in a Consumer Search Duopoly

Yankelevich, Aleksandr; Vaughan, Brady

doi:10.1002/soej.12118

Cited by 13 publications

(8 citation statements)

References 37 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.…”

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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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“…Consequently, PMG increases consumers' option value of purchase and knowing this, all retailers charge a higher price. Yankelevich and Vaughan (2016) assume that some shoppers patronize PMG retailers only and will invoke PMG if a lower price exists. As a result, PMG increases retail prices.…”

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Price-Matching Guarantees with Endogenous Consumer Search

2017

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“…Besides [8], there are a growing stream of literature choose price matching. Yankelevich and Vaughan [31] found that announcements to price-match raise prices by altering heterogeneous consumer search behavior by using a model of sequential search. Price increases grow in the proportion of consumers who invoke price-matching guarantees and in the level of equilibrium asymmetry.…”

Section: Literature On the Impact Of Dynamic Pricing And Price Matmentioning

confidence: 99%

How Does Heterogeneous Consumer Behavior Affect Pricing Strategies of Retailers?

Peng

2020

IEEE Access

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This paper presents the latest progress on pricing and revenue management. Consumer's switching purchase behavior occurs frequently in perishable goods retail market, and we propose a twoperiod dynamic pricing model among online and offline retailers under heterogeneous purchase behavior of myopic consumers and strategic consumers. Through equilibrium solution and analysis, this study discusses the optimal pricing strategy under the influence of the service perception factor and the proportion of two kinds of consumers. Moreover, this paper analyzes the effect of three pricing strategies on profits to prove the effectiveness of price matching strategy implemented by offline retailers. The results show that the strategic behavior of heterogeneous consumers does not always have a negative impact on the profits of two retailers. The offline retailers can strategically choose to set higher prices to increase profits, and online retailers can also reduce the impact of heterogeneous consumer behavior by disclosing product attribute information. It is unwise for online retailers to take the initiative to match the price set by the offline retailers. In contrast, offline retailers can achieve a win-win situation for both retailers by matching the price of the online retailers actively.

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“…Whereas Janssen and Parakhonyak (2013) assume that no consumer knows which firms offer PMGs, Jiang, Kumar, and Ratchford (2016) and Yankelevich and Vaughan (2016) assume the opposite: all consumers know which firms provide a PMG. In either case, PMGs cannot act as a signal of low prices.…”

Section: Related Literaturementioning

confidence: 99%

Price-Matching Guarantees as a Direct Signal of Low Prices

Mamadehussene¹

2019

Journal of Marketing Research

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If consumers believe that stores offering price-matching guarantees (PMGs) charge low prices, high-search-cost consumers will purchase from PMG stores. This leads PMG stores’ demand to be less price sensitive, which drives these stores to charge higher prices. The belief that PMG stores charge low prices paradoxically leads them to charge high prices. For this reason, the literature finds that PMGs can only signal low prices when firm heterogeneity is sufficiently large. Because PMGs are offered by retailers that purchase the same product from the same producer, large firm heterogeneity may be a strong assumption. This article proposes a theory that explains how homogeneous firms may signal their low prices through PMGs: consumers perceive PMG stores to have lower prices not because they expect them to have low marginal costs or service quality, but simply because they offer a PMG.

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Price-Match Announcements in a Consumer Search Duopoly

Cited by 13 publications

References 37 publications

Price-Matching Guarantees with Endogenous Consumer Search

Price-Matching Guarantees with Endogenous Consumer Search

How Does Heterogeneous Consumer Behavior Affect Pricing Strategies of Retailers?

Price-Matching Guarantees as a Direct Signal of Low Prices

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