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Self-Serving Behavior in Price-Quality Competition

Author

Listed:
  • Marco Bertini

    (URL - Universitat Ramon Llull [Barcelona])

  • Daniel Halbheer

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Oded Koenigsberg

    (School of Business [London] - LSBU - London South Bank University)

Abstract

We present a theory of price and quality decisions by managers who are self-serving. In the theory, firms emphasize the price or quality of their products, but not both. Accounting for this, managers exploit any uncertainty about the cause of market outcomes to credit positive results to the dominant, "strategic" factor and blame negative results on the other. The problem with biased explanations, however, is that they prompt biased decisions. The present study reports experimental evidence that support this argument and develops a model to understand the impact of the bias on firm performance. Counter to intuition, we find that firms in a competitive setting actually profit from the self-serving nature of their managers.

Suggested Citation

  • Marco Bertini & Daniel Halbheer & Oded Koenigsberg, 2012. "Self-Serving Behavior in Price-Quality Competition," Working Papers hal-01993405, HAL.
    • Handle: RePEc:hal:wpaper:hal-01993405
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Causal reasoning; self-serving bias; strategic orientation; managerial decision-making;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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