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An analysis on price matching policy

Published: 13 August 2006 Publication History

Abstract

Price matching policies have been widely adopted in retailing and other industrial markets. The flourishing online channels have made price comparison and matching much easier. Previous research on price matching policy focuses on how this policy impacts the competition among sellers based on simultaneous pricing games. However, besides the role to match the competitors' current price during a purchase (i.e. concurrent price matching), price matching policy usually has another role: to match a seller's own price or the competitors' price if the price drops within a specified period after the purchase (i.e. posterior price matching). This role has important implication for consumers' purchasing behavior. Rational consumers may delay purchasing, hoping for possible markdowns that come later. This delayed purchasing behavior, however, may harm a seller's profit. Posterior price matching allows a seller to induce early purchasing of buyers. This is because with a guarantee to match the lower price that may be offered by the seller later, a buyer cannot gain by waiting. On the other hand, posterior price matching reduces a seller's pricing power, and also changes a seller's pricing strategy over time, influencing a buyer's utility. Therefore whether or not posterior price matching benefits sellers or buyers deserve a close examination. In this paper, we present an analytical model that investigates the impact of posterior price matching on both the buyers' utility and the seller's revenue in three scenarios: (1) the seller is a monopolist in the market; (2) the seller is a semi-monopolist in the market, i.e., he is a monopolist in the first period, but the market is perfectly competitive and he has no pricing power in the second period; and (3) the seller is a price-taking seller, i.e., the market is perfectly competitive, in both periods. We find that in scenario 1 a price matching policy is beneficial for the seller but makes the buyers worse off. However, in scenario 2 and 3, we find that there exists a wide range of situations where a price matching policy surprisingly can benefit both parties.

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  • (2017)A group-buying mechanism for considering strategic consumer behaviorElectronic Commerce Research10.1007/s10660-016-9232-917:4(721-752)Online publication date: 1-Dec-2017
  • (2009)State of Cybersecurity and the Roadmap to Secure Cyber Community in Cambodia2009 International Conference on Availability, Reliability and Security10.1109/ARES.2009.144(652-657)Online publication date: Mar-2009

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cover image ACM Other conferences
ICEC '06: Proceedings of the 8th international conference on Electronic commerce: The new e-commerce: innovations for conquering current barriers, obstacles and limitations to conducting successful business on the internet
August 2006
624 pages
ISBN:1595933921
DOI:10.1145/1151454
Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

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Association for Computing Machinery

New York, NY, United States

Publication History

Published: 13 August 2006

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Author Tags

  1. post-sale
  2. price matching
  3. pricing
  4. retailing
  5. strategic consumer
  6. win-win

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ICEC '06 Paper Acceptance Rate 53 of 112 submissions, 47%;
Overall Acceptance Rate 150 of 244 submissions, 61%

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Cited By

View all
  • (2023)Pricing and insurance strategy of online retailers for the price adjustment protection policyElectronic Commerce Research10.1007/s10660-023-09723-3Online publication date: 1-Jul-2023
  • (2017)A group-buying mechanism for considering strategic consumer behaviorElectronic Commerce Research10.1007/s10660-016-9232-917:4(721-752)Online publication date: 1-Dec-2017
  • (2009)State of Cybersecurity and the Roadmap to Secure Cyber Community in Cambodia2009 International Conference on Availability, Reliability and Security10.1109/ARES.2009.144(652-657)Online publication date: Mar-2009

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