Self-Serving Behavior in Price-Quality Competition
Managers like to think well of themselves, and of the firms that employ them. However, positive illusions can bias a manager's evaluation of market outcomes, self-servingly crediting success on the superior quality of one's own product but blaming failure on the aggressive price of a competitor's offering. These distorted attributions stem from the idea that product quality better serves the manager's motivation for self-enhancement and self-presentation than price: product quality is seemingly more central to the firm, less susceptible to external market forces, and more stable over time. We position our theory in the psychology of attribution, define self-serving behavior and provide experimental and survey evidence of this phenomenon, and develop a model of price-quality competition that incorporates the empirical findings. In particular, we first study the natural benchmark equilibrium provided by unbiased decision makers. We then introduce self-serving behavior in the presence of myopic principals, or of forward-looking principals who anticipate the limitations of managers and set first-period decisions accordingly.
|Date of creation:||2013|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
More information through EDIRC
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.:
- Todd R. Kaplan & Bradley J. Ruffle, 2004. "The Self-serving Bias and Beliefs about Rationality," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 237-246, April.
- Spiegler, Ran, 2014.
"Bounded Rationality and Industrial Organization,"
Oxford University Press, number 9780199334261, April.
- Spiegler, Ran, 2011. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780195398717, April.
- Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
- Xavier Gabaix & David Laibson, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 505-540.
- Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
- Laibson, David I. & Gabaix, Xavier, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," Scholarly Articles 4554333, Harvard University Department of Economics.
- Cooper, Arnold C. & Woo, Carolyn Y. & Dunkelberg, William C., 1988. "Entrepreneurs' perceived chances for success," Journal of Business Venturing, Elsevier, vol. 3(2), pages 97-108.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, July.
- Philippe Aghion & Patrick Bolton, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 473-494.
- Weiner, Bernard, 2000. " Attributional Thoughts about Consumer Behavior," Journal of Consumer Research, Oxford University Press, vol. 27(3), pages 382-387, December.
- Spiegler, Ran, 2006. "Competition over agents with boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 1(2), pages 207-231, June.
- Ran Spiegler, 2005. "Competition over Agents with Boundedly Rational Expectations," Levine's Bibliography 122247000000000535, UCLA Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:79842. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.