Low price guarantee, are you guaranteed the lowest price

University essay from Luleå/Industriell ekonomi och samhällsvetenskap

Author: Linda Lundberg; [2008]

Keywords: Low-price guarantee;

Abstract: The purpose of this thesis is to examine the economic and competitive
effects from low-price guarantees in the Swedish electronics market. More
exactly, it studies the effects on price when a LPG is offered in order to
find whether the guarantee is tacit collusion-facilitating, price-
discriminating, or simply a signal of low-price. The first two theories are
most likely anti competitive while the third is pro competitive. This
thesis does not provide any conclusive results regarding whether the LPG is
pro or anti competitive. Instead it suggests that the LPG offered by one
firm is a signal of low-price, but that it most likely works as a device to
facilitate price discrimination for another firm. However, the overall
effect of the LPG on this market is most likely pro competitive since the
data shows that the general price-level is decreasing towards the price of
the firm which actually has the lowest price.