Experimental Duopolies Under Price Guarantees

In a symmetric differentiated experimental duopoly we test the ability of Price Guarantees (PGs) to raise prices above the competitive levels. Different types of PGs (aggressive and soft price-beating and price-matching) are implemented either as an exogenously imposed market rule or as a business strategy. Our results show that PGs may lead close to the collusive outcome, depending on whether the interaction between duopolists is repeated and provided that the guarantee is not of the aggressive price-beating type.

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