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Cognitive time as a service price determinant: Hidden dynamics and price collapse

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  • von Schéele, Fabian
  • Haftor, Darek M.
  • Pashkevich, Natallia

Abstract

A novel service price equation is advanced to explain how prices in the services market depend on service workers’ cognitive time in relation to the actual clock time (physical time) that is contracted for a service. Cognitive time affects service revenues, costs, the targeted service profit, and budgeted service time. The equation shows how the cognitive time of service workers produces a hidden price-lever effect, in which the service price behavior becomes non-linear. A minor difference between the cognitive time and the physical time of a given service generates a significant change in the price level required to realize a targeted service profit. If the workload of a service worker is increased to a certain level, there is a potential service price collapse, implying that the service provider cannot reach the budgeted profit. This collapse condition further advances the emerging literature on behavioral pricing of services.

Suggested Citation

  • von Schéele, Fabian & Haftor, Darek M. & Pashkevich, Natallia, 2020. "Cognitive time as a service price determinant: Hidden dynamics and price collapse," Journal of Business Research, Elsevier, vol. 112(C), pages 248-253.
    • Handle: RePEc:eee:jbrese:v:112:y:2020:i:c:p:248-253
    DOI: 10.1016/j.jbusres.2019.10.056
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    References listed on IDEAS

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    Cited by:

    1. Qiao, Sen & Chen, Hsing Hung & Zhang, Rong Rong, 2021. "Examining the impact of factor price distortions and social welfare on innovation efficiency from the microdata of Chinese renewable energy industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).
    2. Pashkevich, Natallia & von Schéele, Fabian & Haftor, Darek M., 2023. "Accounting for cognitive time in activity-based costing: A technology for the management of digital economy," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).

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