Earlier quoted context omitted.
> Why do a price match guarantee? Why not just price your items lower? MAD [1]. Price-match guarantees are meant to deter price competition. If you cut your price below a price-matching competitor's, the time you have the best price will be short. After that, less profit for everyone (assuming similar cost structures). If, on the other hand, you match, everyone keeps their market share and margins. Price competition…
Don't we want companies to engage in price competition though? Especially in a market with network effects which is dominated by a few large players.
The literature is mixed on the effects of price-matching guarantees [1][2]. The most compelling resolution I've read says "price-matching guarantees can facilitate monopoly pricing only if firms automatically match prices. If consumers must instead request refunds (thereby incurring hassle costs)...any increase in equilibrium prices due to firms’ price-matching policies will be small; often, no price increase can be supported" [3].
In any case, enforcing an automatic price-matching ban would be difficult. Would you prohibit firms from lowering their prices to match competitors'? If not, it would just take a few turns of the ratchet to send the message to would-be competitors (and consumers). Whether the consumer surplus from those ratchet turns are worth the enforcement cost is an open question.
[1] https://www.bauer.uh.edu/jhess/documents/10.pdf
[2] http://people.tamu.edu/~sjain/papers/published%20pmr%20paper...
[3] http://www.simon.rochester.edu/fac/SHAFFER/Published/Hassel%...