Output decisions and price matching: theory and experiment

Article


Batsaikhan, M. and Tumennasan, N. 2018. Output decisions and price matching: theory and experiment. Management Science. 64 (8), pp. 3609-3624. https://doi.org/10.1287/mnsc.2017.2788
TypeArticle
TitleOutput decisions and price matching: theory and experiment
AuthorsBatsaikhan, M. and Tumennasan, N.
Abstract

We study the effects of price matching in a setting in which each firm selects both its price and output, simultaneously. We show that the availability of a price-matching option leads to the Cournot outcome in this setting. Our experimental study confirms this result in the laboratory. Our finding is a stark contrast to the one obtained in the standard price competition that the most likely market price in the presence of a price-matching option is the monopolistic price. In addition, we show that price matching benefits consumers in markets with a large number of firms. If a market has a few firms, then the effects of price matching on consumers depend on the market demand and cost functions. Thus, our study suggests that the effect of price matching depends on the strategic variables of the firms.

Keywordsprice matching; output decision; cournot outcome
Sustainable Development Goals9 Industry, innovation and infrastructure
Middlesex University ThemeCreativity, Culture & Enterprise
LanguageEnglish
PublisherInstitute for Operations Research and the Management Sciences
JournalManagement Science
ISSN0025-1909
Electronic1526-5501
Publication dates
Online03 Aug 2017
PrintAug 2018
Publication process dates
Accepted17 Feb 2017
Deposited25 Jan 2024
Output statusPublished
Digital Object Identifier (DOI)https://doi.org/10.1287/mnsc.2017.2788
Web of Science identifierWOS:000440922200009
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