Never Knowingly Undersold – Do Price Match Guarantees Result in Lower Prices?

Abstract

Price Match Guarantees (PMGs) are commitments by retailers to match or beat competitors’ prices, commonly employed across various industries. Whilst these guarantees supposedly benefit consumers by ensuring lower prices, economic theory presents mixed predictions regarding their actual impact. This study empirically examines the effects of removing a PMG policy at a leading UK retailer. The findings reveal that prices increased following the policy’s removal, offering support for the pro-competitive effects of PMGs. Notably, the price increases occurred not at the retailer that eliminated the guarantee but amongst its competitors, highlighting the broader market implications of such policies. I provide evidence consistent with a signalling mechanism underlying these findings. These results provide novel insights into the competitive dynamics of price match guarantees.

Rhys J. Williams

PhD Candidate

Rhys is a doctoral candidate in Economics at the University of Cambridge. His research interests are in applied microeconomics, with a focus on competition and health questions.