IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v112y2020icp248-253.html

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S014829631930640X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2019.10.056?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Tom Fangyun Tan & Serguei Netessine, 2014. "When Does the Devil Make Work? An Empirical Study of the Impact of Workload on Worker Productivity," Management Science, INFORMS, vol. 60(6), pages 1574-1593, June.
    2. Franziska Völckner & Julian Hofmann, 2007. "The price-perceived quality relationship: A meta-analytic review and assessment of its determinants," Marketing Letters, Springer, vol. 18(3), pages 181-196, September.
    3. Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
    4. Sinan Aral & Erik Brynjolfsson & Marshall Van Alstyne, 2012. "Information, Technology, and Information Worker Productivity," Information Systems Research, INFORMS, vol. 23(3-part-2), pages 849-867, September.
    5. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    6. von Schéele, Fabian & Haftor, Darek M., 2018. "Temporal workload in economic organizations: A hidden non-linear condition of economic efficiency," Journal of Business Research, Elsevier, vol. 88(C), pages 415-420.
    7. Wen-Chyuan Chiang & Jason C.H. Chen & Xiaojing Xu, 2007. "An overview of research on revenue management: current issues and future research," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 1(1), pages 97-128.
    8. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
    9. von Schéele, Fabian & Haftor, Darek M. & Pashkevich, Natallia, 2019. "Cognitive time distortion as a hidden condition of worker productivity," Journal of Business Research, Elsevier, vol. 101(C), pages 591-596.
    10. Raphael Amit & Christoph Zott, 2001. "Value creation in E‐business," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 493-520, June.
    11. Gabriel Bitran & René Caldentey, 2003. "An Overview of Pricing Models for Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 203-229, August.
    12. Lillian L. Cheng & Kent B. Monroe, 2013. "An appraisal of behavioral price research (part 1): price as a physical stimulus," AMS Review, Springer;Academy of Marketing Science, vol. 3(3), pages 103-129, September.
    13. Martin, William C. & Ponder, Nicole & Lueg, Jason E., 2009. "Price fairness perceptions and customer loyalty in a retail context," Journal of Business Research, Elsevier, vol. 62(6), pages 588-593, June.
    14. Fabian von Schèele & Darek M. Haftor, 2014. "Cognitive Time Distortion on the Performance of Economic Organizations," Systems Research and Behavioral Science, Wiley Blackwell, vol. 31(1), pages 77-93, January.
    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


    Cited by:

    1. Kopalle, Praveen K. & Lehmann, Donald R. & Ramachandran, Divya & Wetzels, Ruud, 2025. "Journal of Business Research Publications 1973–2024: Topics, methodological approaches, data, and analyses conducted," Journal of Business Research, Elsevier, vol. 194(C).
    2. 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).
    3. 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).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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).
    2. Gerlinde Fellner & Matthias Sutter, 2009. "Causes, Consequences, and Cures of Myopic Loss Aversion – An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 119(537), pages 900-916, April.
    3. Arkes, Hal R. & Hirshleifer, David & Jiang, Danling & Lim, Sonya, 2008. "Reference point adaptation: Tests in the domain of security trading," Organizational Behavior and Human Decision Processes, Elsevier, vol. 105(1), pages 67-81, January.
    4. Schade, Christian & Steul, Martina & Schröder, Andreas, 2002. "Starting points' effects on risk-taking behavior," SFB 373 Discussion Papers 2002,15, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    5. Bucciol, Alessandro & Hu, Alessio & Zarri, Luca, 2019. "The effects of prior outcomes on managerial risk taking: Evidence from Italian professional soccer," Journal of Economic Psychology, Elsevier, vol. 75(PB).
    6. Mohamed Es-Sanoun & Jude Gohou & Mounir Benboubker, 2023. "Testing of Herd Behavior In african Stock Markets During COVID-19 Pandemic [Essai de vérification du comportement mimétique dans les marchés boursiers africains au cours de la crise de covid-19]," Post-Print hal-04144289, HAL.
    7. Luc Meunier & Sima Ohadi, 2023. "When are two portfolios better than one? A prospect theory approach," Theory and Decision, Springer, vol. 94(3), pages 503-538, April.
    8. Lovric, M. & Kaymak, U. & Spronk, J., 2008. "A Conceptual Model of Investor Behavior," ERIM Report Series Research in Management ERS-2008-030-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    9. Müller, Holger & Kroll, Eike B. & Vogt, Bodo, 2012. "Violations of procedure invariance—The case of preference reversals in monadic and competitive product evaluations," Journal of Retailing and Consumer Services, Elsevier, vol. 19(4), pages 406-412.
    10. Chorvat, Terrence, 2006. "Taxing utility," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(1), pages 1-16, February.
    11. Eduard Marinov, 2017. "The 2017 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 117-159.
    12. Duncan Luce, R., 1997. "Associative joint receipts," Mathematical Social Sciences, Elsevier, vol. 34(1), pages 51-74, August.
    13. Eszter Czibor & Danny Hsu & David Jimenez-Gomez & Susanne Neckermann & Burcu Subasi, 2022. "Loss-Framed Incentives and Employee (Mis-)Behavior," Management Science, INFORMS, vol. 68(10), pages 7518-7537, October.
    14. Nobel Prize Committee, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.
    15. Peter J Buckley & Liang Chen & L Jeremy Clegg & Hinrich Voss, 2018. "Risk propensity in the foreign direct investment location decision of emerging multinationals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 153-171, February.
    16. Markus Dertwinkel-Kalt & Johannes Kasinger & Dmitrij Schneider, 2024. "Skewness Preferences: Evidence from Online Poker," CESifo Working Paper Series 10977, CESifo.
    17. Elie Matta & Jean McGuire, 2008. "Too Risky to Hold? The Effect of Downside Risk, Accumulated Equity Wealth, and Firm Performance on CEO Equity Reduction," Organization Science, INFORMS, vol. 19(4), pages 567-580, August.
    18. Martin Kukuk & Stefan Winter, 2008. "An Alternative Explanation of the Favorite-Longshot Bias," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 2(2), pages 79-96, September.
    19. Lam, Kin & Lean, Hooi Hooi & Wong, Wing-Keung, 2016. "Stochastic Dominance and Investors’ Behavior towards Risk: The Hong Kong Stocks and Futures Markets," MPRA Paper 74386, University Library of Munich, Germany.
    20. Xue Dong He & Sang Hu & Jan Obłój & Xun Yu Zhou, 2017. "Technical Note—Path-Dependent and Randomized Strategies in Barberis’ Casino Gambling Model," Operations Research, INFORMS, vol. 65(1), pages 97-103, February.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:112:y:2020:i:c:p:248-253. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.