Advanced Search
MyIDEAS: Login

Effects of Objectives and Information on Managerial Decisions and Profitability

Contents:

Author Info

  • JS Armstrong

    (The Wharton School - University of Pennsylvania)

  • Fred Collopy

    (Case Western Reserve University,)

Abstract

Managers are often advised, 'beat your competitors,' which sometimes contrasts with the advice, 'do the best for your firm.' This may lead managers to focus on comparative measures such as market share. Drawing on game theory, the authors hypothesize that managers are competitor oriented under certain conditions, in particular, when they are provided with information about competitors' performance. Empirical studies lead to the additional hypothesis that a competitor orientation is detrimental to performance. To examine these hypotheses, the authors conduct two studies. The first is a laboratory study in which 1,016 subjects made pricing decisions. When information about the competitor's profits was provided, over 40% of the subjects were willing to sacrifice part of their company's profits to beat or harm the competitor. Such competitor-oriented behavior occurred across a variety of treatments. The second is a field study used to examine the performance over a half- century of 20 large U.S. firms with differing objectives. Firms with competitor-oriented (market, share) objectives were less profitable and less likely to survive than those whose objectives were directly oriented to profits.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://128.118.178.162/eps/get/papers/0412/0412014.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series General Economics and Teaching with number 0412014.

as in new window
Length: 22 pages
Date of creation: 06 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpgt:0412014

Note: Type of Document - pdf; pages: 22
Contact details of provider:
Web page: http://128.118.178.162

Related research

Keywords: management; decisions;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Mueller, Dennis C., 1992. "The corporation and the economist," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 147-170, June.
  2. JS Armstrong & Roderick J. Brodie, 2004. "Effects of Portfolio Planning Methods on Decision Making: Experimental Results," General Economics and Teaching 0412016, EconWPA.
  3. Cynthia A. Montgomery & Birger Wernerfelt, 1991. "Sources of Superior Performance: Market Share Versus Industry Effects in the U.S. Brewing Industry," Management Science, INFORMS, vol. 37(8), pages 954-959, August.
  4. Shimp, Terence A & Hyatt, Eva M & Snyder, David J, 1991. " A Critical Appraisal of Demand Artifacts in Consumer Research," Journal of Consumer Research, University of Chicago Press, vol. 18(3), pages 273-83, December.
  5. Parks, Bill & Pharr, Steven W. & Lockeman, Bradley D., 1994. "A marketer's guide to Clausewitz: Lessons for winning market share," Business Horizons, Elsevier, vol. 37(4), pages 68-73.
  6. Anterasian, Cathy & Graham, John L., 1989. "When it's good management to sacrifice market share," Journal of Business Research, Elsevier, vol. 19(3), pages 187-213, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Robert Meyer & Joachim Vosgerau & Vishal Singh & Joel Urbany & Gal Zauberman & Michael Norton & Tony Cui & Brian Ratchford & Alessandro Acquisti & David Bell & Barbara Kahn, 2010. "Behavioral research and empirical modeling of marketing channels: Implications for both fields and a call for future research," Marketing Letters, Springer, vol. 21(3), pages 301-315, September.
  2. Lance Brouthers & Dana-Nicoleta Lascu & Steve Werner, 2008. "Competitive Irrationality in Transitional Economies: Are Communist Managers Less Irrational?," Journal of Business Ethics, Springer, vol. 83(3), pages 397-408, December.
  3. Kesten C. Green & J. Scott Armstrong, 2005. "Competitor-oriented Objectives: The Myth of Market Share," Monash Econometrics and Business Statistics Working Papers 17/05, Monash University, Department of Econometrics and Business Statistics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpgt:0412014. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.