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Price matching strategies

Introduction
Lately, price matching can be found in a variety of markets in almost all sectors of the economy. Supermarkets are the sectors that have been immensely impacted by this phenomenon even though other stores that sell consumer electronics, clothing, hotels, office supplies and groceries also practice this phenomenon. Price matching typically is a situation whereby it is an offer by an establishment to lower its price to that of a discounted rival who is selling an identical product to customers who can then offer proof the price of the competitor. In the case of supermarkets, customers are informed of the price matching guarantees through the different forms of advertisement like using the print media, the internet, and television advertisements.
The incentives behind this price-matching
The incentives behind price matching can range from the different options that the supermarkets have to the different options that consumers have. To the consumers, price matching gives them the believe that sellers, who in a way enjoy a cost advantage over their rivals or in some way want to build their market share use the different guarantees in the form of coupons to signal low prices. In this method, the refund cost that a supermarket stands to incur if the customer deems that the low price is incorrect acts as a bond. This further enhances the supermarkets’ customers’ false sense of security. In some way, the consumer is tricked.
Supermarkets have realized that different marketing strategies such as the aggressive advertising can influence how the consumers purchase their products. Due to the various marketing efforts asserted by the different supermarkets in terms of price matching, consumers have come to realize that they always interact with the different price matching brands. Reasonable price matching has also been established to increase competition since it emboldens consumer search. The consumers have come to expect the different coupons that are provided by the supermarkets. This is because the supermarkets understand that price matching influences how a consumer shops. This in its own way affects how the supermarkets prices their products. According to Levitt and Dubner (2014, p.89), it is already know to different sellers that the amount of information that consumers have about a particular seller, the behavior of that consumer normally changes with regard to the information known.
Impacts of price matching
Price matching in the short run normally seems beneficial to the consumers due to the fact that it guarantees the purchase of products at the lowest price in the market. Mccleskey (2004, p.56) notes that the only problem that rises in the long run is that the difference in price does not necessarily mean that it ensures that the supermarket is offering the guarantee in terms of coupons is, in fact, the lowest priced seller. It should be noted that a price matching seller could raise the prices of the products without losing its initial consumers until the rivals of that supermarket also raise their prices, thereby creating a form of collusion without any form of formal agreement. The impact of price matching in this sense is being anticompetitive. The society normally thrives in a market that is competitive. Price matching allow other supermarkets to immediately retaliate against the prices that are offered by one supermarket without even conducting a valid market research about how the competing rival supermarkets came at the price that they set. In some way, this can lead to tacit collusion especially in a non-cooperative market equilibrium whereby the firm’s incentives to cut prices is overshadowed by the need to match the prices of other supermarkets. In the long run, it is the society that is immensely affected by the increase in prices as the supermarkets respond to the actions of the other supermarkets and not on the customers that they are serving. Additionally, price matching strategies allow firms to discriminate against consumers who have little information regarding the market prices. Consumers who have little information can be easily exploited as opposed to the consumers who have information regarding the multiple price choices. A good example, depicted by Friedman (2007, p.67), show that price matching coupons allow firms to keep list prices very high in order to attract welfare from the uninformed consumers, while attracting the consumers who are informed by offering to price-match the rival supermarket when it offers a lower price than theirs.
Bungert (2003, p. 164) reports that price matching strategies produce suggestively higher prices and profits when related to either challenging or trigger pricing. Supermarkets each set their own guidelines for what is and is not likened underprice-matching patterns, and occasionally stock products in diverse sizes, so it can be difficult to tell who the low-priced supermarket overall is. Additionally, in the long run, price matching guarantees by supermarkets can facilitate a kind of monopoly pricing strategy if only the supermarkets automatically match their prices. This is a very precarious situation that consumers may find themselves in. a monopoly created means that supermarkets will be able to set the prices that they want without considering the impacts that it would have on the consumers. In this instance, it is up to the consumers to ensure that they request the refunds in terms of the guarantees that the supermarkets have provided. In this case, any increase in the equilibrium prices that are provided by the supermarkets due to the policies of the supermarkets price matching will be small. The supermarkets will not be in a position to support the increase in prices due to the hassle costs that they would incur. The downside of price matching that is hurtful o the consumers is that consumers rarely invoke the price matching guarantees. Price discrimination theory supports the consumers to invoke the price matching guarantees.
Conclusion
In conclusion, the paper has explored the incentives of supermarkets to implement the different price matching strategies and the impacts that the price matching strategies have in the supermarkets and the society in the form of consumers. Price matching strategies change the shopping behaviors of customers. Supermarkets are taking advantage of the information that consumers have regarding the market prices. According to Olson, (1971, p.78) when consumers who have no cost of priced search invoke the price matching guarantees in terms of the coupons that they have, the supermarkets list prices that are higher. Supermarkets are thereby discouraged from lowering the prices of the products that they sell so that they can attract the uninformed consumers. The influence that price matching has on customer search leads to both benefit weakening tacit collusion and price
discernment. Tacit collusion ensues because firms comprehend that a competitor’s “threat” to
match a lesser price entails a reduced benefit from any incremental price cut. This risk
surges the greater the percentage of customers who have witnessed both prices that entreats price-matching assurances. In the short run, however, it is the society that stands to benefit from the price matching strategies of the supermarkets while, in the long run, it is the supermarkets that benefit.

Bibliography
Bungert, M. (2003). Termination of Price Wars a Signaling Approach. Wiesbaden, Deutscher Universitätsverlag. http://dx.doi.org/10.1007/978-3-322-81625-2.
Mccleskey, S. (2004). Achieving market integration best execution, fragmentation and the free flow of capital. Oxford, Butterworth-Heinemann. http://public.eblib.com/choice/publicfullrecord.aspx?p=296797.
Levitt, S. D., & Dubner, S. J. (2014). Freakonomics a rogue economist explores the hidden side of everything. New York, Morrow. http://rbdigital.oneclickdigital.com.
Olson, M. (1971). The logic of collective action public goods and the theory of groups. Cambridge, Mass, Harvard University Press. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A N=282683.
Friedman, M. (2007). Price theory. New Brunswick, NJ, Transaction Publishers. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A N=395716.

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