Reference no: EM133599692

Question: A large chain of gas stations in Germany introduced a Price Matching Guarantee (PMG) in 2015, whereby customers could obtain a lower price for gasoline if they could show a competing gas station was offering a lower price at the time of sale. Empirical research finds that this program led to an increase in the average market price. In the absence of a PMG, we would expect that rival gas stations (and collusion partners) could their price in order to increase profit in the short term. With the PMG, such a move by rivals would have a(n)effect on sales, which could explain the empirical result above.