Abstract
This paper examines the profitability of running an advertisement that promises to pay damage to customers who can find a (serious) price offer that the firm will not undercut. The authors show that such an advertisement can support a collusive price, and furthermore, that no other firm has an incentive to duplicate the advertisement. The results are shown to be relevant in areas that span several topics in the literature, including models of sales, brand loyalty, and the literature on price matching mechanisms.