Introduction
Consumers often face purchase decisions involving uncertainty
related to getting the “best” or “lowest” price. In such
instances, consumers likely recognize that there is a range of
market prices, but are uncertain as to the location of specific
retailers in that range. Thus, consumer incentive to search
for price information is high (Urbany 1986). To reduce this
incentive, retailers often communicate to consumers that they
have low prices by offering a guarantee that their price is
truly a low price on a specific product or a group of products.
Often this guarantee offers to refund the difference between
a retailer’s offer price and any lower price found in the market
and may include an additional penalty. For example, the
following is a low price guarantee policy from a well-known
seller of sporting goods (the store name has been intentionally
removed):