Date

5-1-2018

Document Type

Thesis

Degree

Master of Science

Department

Economics

First Adviser

Dearden, James A.

Abstract

I examine the relationship between brick-and-mortar retailers offering price-matching guarantees and the atmosphere of their stores. In an extension of the Hotelling model, if a retailer improves the atmosphere of its store, then it raises its price. However, with a price-match guarantee and a competitor with a lower-quality store and a lower price, some of the retailer’s consumers may demand a price match. I identify the circumstances under which a price-match guarantee prevents a retailer from earning increased revenues that may result from improving its in-store atmosphere. In my model, the results depend on the share of consumers who seek price matches and the share of consumers who are loyal to the retailer.

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