The impact of cognitive style, entrepreneurial attitudes and gender on competitive price responses
| Pages | 759-770 |
| Published date | 20 November 2017 |
| Date | 20 November 2017 |
| DOI | https://doi.org/10.1108/JPBM-05-2016-1189 |
| Author | Hooman Estelami,Mohammad G. Nejad |
| Subject Matter | Marketing,Product management,Brand management/equity |
The impact of cognitive style, entrepreneurial
attitudes and gender on competitive
price responses
Hooman Estelami and Mohammad G. Nejad
Gabelli School of Business, Fordham University, New York, New York, USA
Abstract
Purpose –While existing research has established various methods for pricing, the impact of a man ager’s individual psychological profile on his/her
price setting behavior is relatively unexamined. This is especially critical in the context of pricing decisions implemented in response to competitive
forces. This paper aims to explore how a manager’s price responses to price cuts by a competitor are affected by his/her cognitive style, gender and
entrepreneurial attitudes.
Design/methodology/approach –In the first study, a simulation-based pricing environment is used in a lab setting to capture the dynamics of
pricing decisions made in response to competitive price cuts. Participants’price responses are captured in the form of the magn itude of price change
implemented in a simulated environment in response to a competitor’s price reduction. The second study extends the scope of inquiry by using a
national sample of business professionals and replicates and reinforces the findings of the first study by capturing participants’attitudinal response
on the decision to reduce prices in reaction to competitive price reductions.
Findings –The results of both studies indicate significant effects for cognitive style, gender and entrepreneurial attitudes. Individuals with str onger
entrepreneurial attitudes and analytical cognitive styles, and females are less likely to engage in reactive price reductions.
Research limitations/implications –The findings of this study indicate that managers’propensity to engage in price changes in reaction to
competitors can be linked to their psychological profile and gender.
Practical implications –Given the existence of the relationship between price reactions of managers and their cognitive style and entrepreneurial
attitudes, the training and development of pricing professionals may need to take these individual-level factors into account.
Originality/value –This is the first study that has linked managers’propensity to engage in price changes in reaction to competitors to their gender
and psychological profile.
Keywords Gender, Entrepreneurship, Simulation, Reactive pricing, Decision style, Price reaction
Paper type Research paper
Introduction
Optimal management of prices is critical to the long-term
success of firms. Marketing managers need to assess
relationships between price, demand and profitability to
manage their prices in a gainful way. The use of these
relationships can strategically guide a brand’s prices to achieve
specificfinancial and marketing goals (Monroe, 2002).
However, research suggests that firms often do not adopt a
comprehensive pricing strategy (Iyer et al., 2015), and price-
setters often tend to use simplistic decision rules, such as
reliance on measures of brand strength and competitive
intensity, to set their prices relative to competitors (Rusetski,
2014). Survey research also indicates that the majority of
executives believethat their firms do not have clear and optimal
pricing strategies (Accenture, 2011). Meanwhile, it has been
shown that a 1 per cent increase in average prices of services
and goods can result in nearly a 10 per cent gain in operating
profits for the typical globalfirm (Baker et al.,2010).
Despite the critical role that optimal pricing plays in
maximizing firm profits,research on managers’pricing decision
behavior and the contributorsto suboptimal pricing decisions is
relatively limited (Hammond et al.,2006;Iyer et al.,2015).
Previous studies have, however, identified some of the
tendencies that exist in managers’price-setting decisions,
including their propensity to follow competitors in setting
prices by focusing on market-oriented goals such as market
share rather than profit-maximizingobjectives (Armstrong and
Collopy, 1996,Foreman et al., 2014). Abundant examples of
this propensity can be found in the history of markets such as
those of video games, airline services and grocery retailing, in
which single-mindedpursuit of market share has been found to
threaten both firm survival and industry profitability (Liu,
2010;Rao et al., 2000;vanHeerde et al., 2008). Such a mindset
can have significant and often negative consequences for firms
(Baker et al., 2010;Iyer et al., 2015). Therefore, there is a
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
26/7 (2017) 759–770
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-05-2016-1189]
Both authors have contributed equally to the development of this paper.
Received 30 May 2016
Revised 26 September 2016
20 October 2016
Accepted 30 October 2016
759
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