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The impact of corporate size and strategy on competitive pricing

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  • Gerald J. Tellis

Abstract

Larger firms are often hypothesized to have higher prices than smaller competitors because of their market power or implicit collusion on prices. Advertising is often suggested as another cause of price elevation due to its ability to differentiate products of equivalent or inferior quality. This study examines the effect of these and other factors on prices in the major home appliance industry. The most interesting result is the strong corporate effect on prices, which permeates pricing strategies across categories, models and time. Contrary to the hypotheses listed above, larger corporations have lower prices, and advertised products are not higher priced. Strategic and policy implications are discussed.

Suggested Citation

  • Gerald J. Tellis, 1989. "The impact of corporate size and strategy on competitive pricing," Strategic Management Journal, Wiley Blackwell, vol. 10(6), pages 569-585, November.
    • Handle: RePEc:bla:stratm:v:10:y:1989:i:6:p:569-585
    DOI: 10.1002/smj.4250100605
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    Cited by:

    1. Caves, Richard E. & Greene, David P., 1996. "Brands' quality levels, prices, and advertising outlays: empirical evidence on signals and information costs," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 29-52.
    2. Belassi, W & Fadlalla, A, 1998. "An integrative framework for FMS diffusion," Omega, Elsevier, vol. 26(6), pages 699-713, December.
    3. Christine Moorman & Rex Du & Carl F. Mela, 2005. "The Effect of Standardized Information on Firm Survival and Marketing Strategies," Marketing Science, INFORMS, vol. 24(2), pages 263-274, September.
    4. Debanjan Mitra & Peter N. Golder, 2006. "How Does Objective Quality Affect Perceived Quality? Short-Term Effects, Long-Term Effects, and Asymmetries," Marketing Science, INFORMS, vol. 25(3), pages 230-247, 05-06.
    5. Chen, Tianxu & Tribbitt, Mark A. & Yang, Yi & Li, Xiaomei, 2017. "Does rivals' innovation matter? A competitive dynamics perspective on firms' product strategy," Journal of Business Research, Elsevier, vol. 76(C), pages 1-7.
    6. Elahe Kordi Ghasrodashti, 2018. "Explaining brand switching behavior using pull–push–mooring theory and the theory of reasoned action," Journal of Brand Management, Palgrave Macmillan, vol. 25(4), pages 293-304, July.

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