Behavioral issues in price setting in business-to-business marketing: A framework for analysis
Section snippets
Understanding managers' impacts on the price setting process
Scholars have proposed several rational and normative frameworks for decision making with respect to prices (see, for examples, Morris and Calantone, 1990, Noble and Gruca, 1999, Oxenfeldt, 1973, Tellis, 1986). Such a normative focus is indeed warranted given that pricing is often viewed by managers in tactical rather strategic terms (Dutta, Bergen, Levy, Ritson, & Zbaracki, 2002), and most managers are daunted by the complexities of developing elaborate pricing plans for their products (
Understanding behavioral issues in the pricing process: towards a framework
As argued earlier, our understanding of ways prices are actually set by firms would not only enable the development of better normative frameworks for pricing but also enable researchers to propose models and frameworks that are more realistic. Rational and normative pricing models are often structured as conditional if-then logical statements. In such models, there is little scope for roles played by managerial discretionary decision making. In reality, however, pricing decisions, even though
Implications and extensions to theory and research
Descriptive realities of the individual influences on price setting within organizations can be explained by two alternative perspectives. One, the popular research stream pioneered by Tversky, Kahneman and others maintains that individuals are subject to biases and these biases contribute to deviations from behaviors and outcomes that are suggested by normative models of economic decision making (Kahneman et al., 1982, Tversky and Kahneman, 1974). Thus, this perspective holds that while models
Conclusion
Suboptimal pricing by decision-makers could be attributed to a variety of factors. For one, pricing involves inputs from multiple divisions within the firm, such as finance and accounting, among others, and stakeholders within and outside the firm, including intermediaries. Moreover, pricing involves considerations of a variety of complex factors within the firm, including appropriate costing and cost allocations, marginal profits, etc., as well as outside the firm, including customer demand
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