A price-matching guarantee (PMG), or an offer to meet competitive prices, is a commonly used retail tactic. I investigate the effects of PMG presence and the effects of three PMG characteristics, the ...refund depth, the scope of the coverage and the length of refund period on consumer retail perceptions and behavior. The conceptual model is based on signaling theory and the cost-benefit model. High (versus low) levels of PMG characteristics are proposed to act as stronger low price signals and lead to more favorable perceptions and behavior. Factors that affect the strength of consumer responses to PMG characteristics are also investigated. Nineteen moderators are identified, and the effects of three moderators (consumer price consciousness, skepticism of marketing claims and intensity of PMG promotion) are empirically examined. A computer simulated shopping experiment is designed to test the proposed model. PMG presence was found to lead to lower price perceptions, higher confidence in low price, lower pre-purchase price search and higher store purchase and post-purchase search than PMG absence. Because of the high level of experimental realism and complexity, such findings are unlikely a result of demand effects, which offered a plausible explanation for prior PMG findings. Findings also show that PMG depth, which focuses on the economic benefit of PMG, is a more influential driver of consumer behavior that PMG scope and length, where the focus is on the likelihood of receiving the refund. Skeptical and price conscious consumers perceived deep refund as a signal of higher store prices than low refund, whereas less skeptical and less price conscious consumers associated deep refund with lower store prices. At the same time, deep refund increased the incidence of store purchase and decreased the pre-purchase search across all consumer segments, the outcomes both beneficial to PMG retailer. The present research uncovered two mechanisms through which PMG characteristics affect consumers. Signaling theory (Spence 1974) can be used to explain the PMG effects on less price conscious or skeptical consumers, while for highly price conscious or skeptical consumers, attribution theory (Kelley 1967) and the cost-benefit model (Stigler 1961) appear to offer a more plausible explanation.
