Price matching in online retail

Abstract

We analyze a sample of consumer-electronics products sold by the US NewEgg online-retailer to study the impact of price-matching guarantees (PMGs) on prices. By applying a difference-in-differences approach, we find that the price of the policy-adopting retailer increases by 4.7% during the policy validity period and up to 5 days after the treatment, while those of the non-adopting competitor are not affected. Results are mainly driven by highly-rated, visible, and expensive products, whereas the policy does not affect low-rated, less visible, and cheaper products. These findings are consistent with the hypotheses that PMGs act as price discrimination or signaling tools.