Toward an agent-system contingency theory for behavioral supply chain and industrial marketing research

In this study, we develop an agent-system contingency theory as a general multi-level theory of managerial decisions in the supply chain and industrial marketing (SCIM) context. The proposed theory rests on two basic assumptions: agent decision authority and bounded rationality, and postulates that agent-level properties (i.e., relevant personality traits of human agents in SCIM) and system-level properties (i.e., inter-firm and/or intra-firm properties) can concurrently and interactively influence managerial decisions and actions in SCIM. We then propose the synergistic use of experiment and survey as a methodological framework to facilitate the empirical efforts in behavioral SCIM research oriented by the agent-system contingency theory. We also provide empirical illustrations regarding how the agent-system contingency theory and the accompanied methodological framework can be applied to behavioral SCIM research inquiries, using two studies in the decision contexts of opportunism and vertical integration. Combining the proposed multi-level theoretical and methodological approaches, this study offers scholars a platform on which they can systematically advance their behavioral SCIM research agenda in the future.     

Behavioral issues in price setting in business-to-business marketing: A framework for analysis

Business-to-business pricing research has often focused on developing rational and normative frameworks and models for pricing issues, strategies and tactics. However, there has been less attention given to behavioral models that help us understand the realities of pricing and how managers actually set prices. Specifically, there has been less attention given to the various individual and group influences on the price setting process. We apply insights from a steadily increasing body of literature on behavioral decision making to identify some relevant behavioral issues that may affect managerial price setting processes in business-to-business contexts. We conclude with some implications for theory building and practice and an agenda for future research.     

Violations of rational choice principles in pricing decisions

Research on behavioral and psychological aspects of pricing is concerned with violations of rationality. This paper presents a comprehensive overview of the current literature by highlighting those studies that have specific relevance for industrial pricing. I hereby examine two different perspectives. First, by taking the customer perspective, I analyze under which circumstances customer purchase decisions violate basic principles of rational choice. Second, by taking the perspective of managers, I examine which biases affect the process of price setting within firms. This overview meaningfully advances industrial pricing theory and practice: It allows both customers and managers to guard themselves against widely diffused traps in decision making. It also enables managers to favorably influence customer perceptions of value and price without actually changing the price. Finally, by pulling together a number of different research areas into a more parsimonious framework and a tighter narrative, this framework offers systematic directions for future research.     

MEASURING ORGANIZATIONAL DOWNSIDE RISK

Despite widespread incorporation of risk measures in strategy research, there is little consensus regarding the meaning and measurement of risk. In contrast to the variability measures widely used in strategy studies, this paper draws from behavioral decision theory, finance, and management theory to present an alternative perspective on organizational risk—downside risk. The paper explains three categories of organizational downside risk measures based on the concept of lower partial moments. The latter sections of the paper present considerations involved in specifying operational measures of downside risk and an empirical comparison of alternative downside risk measures.     

Progress and Challenges in Product Line Pricing

In recent years, there has been a substantial increase in research on product line pricing. Modelers in multiple disciplines have offered methods for the optimal design/selection and pricing of the products in new or modified product lines. Behavioral scientists have contributed insights on how consumers' perceptions of product line prices, attributes, and quality levels influence their evaluation of the alternative choices. Significantly, the work of both modelers and behavioral scientists is distributed across three types of product line contexts: price‐quality product lines, multi‐attribute product lines, and product lines that include a core product plus options. This paper reviews this literature, and assesses its usefulness for managers. One observation is that, while scholars have developed approaches to optimization that offer increased scope and tractability, the applicability of these models is constrained by the narrow specification of profit functions, and the limited consideration of competitive and other dynamic forces. A second conclusion is that the managerial usefulness of the behavioral science research on perceptions and product‐line choice has been limited by a dependence on attribute‐based estimation of utilities, uncertainty about possible interaction effects, and an excessive focus on the cannibalization aspects of product line pricing. Based on the review, a research agenda is identified for enhancing the applicability of research on consumer perceptions and choice to product line pricing decisions, and for building more complete product line price optimization models.     

Sustaining Collusion Via a Fuzzy Trigger

Probability theory is the standard economic representation of uncertainty, although it is not always an accurate one. Fuzzy logic is an alternative representation that does not require individual beliefs regarding the explicit functional form of uncertainty. This paper applies fuzzy logic to an oligopoly trigger pricing game. The fuzzy trigger pricing game reverses the standard cyclical price war prediction; collusion-sustaining price wars are most likely to occur during times of high demand. The fuzzy model also predicts that markets with relatively volatile prices are more likely to undergo collusion-sustaining price wars. The predictions are consistent with available empirical evidence.     

Testing theories of regulatory behavior

Many decisions by regulators have been analyzed over the last two decades in an effort to test regulatory behavioral theories. As a result, the interest group theory of behavior has gained a considerable following and the public interest theory has been largely dismissed. However, many of these tests are inadequate; with the regulatory decisions analyzed, both the interest group and public interest theories lead to the same predictions. To properly distinguish between these theories, a set of necessary conditions that a regulatory decision must satisfy is developed. Based on these conditions and the extant empirical literature, public interest concerns of regulators cannot be dismissed, and a more general theory of regulatory behavior is suggested.     

Are organizational buyers rational? Using price heuristics in functional risk judgment

Although recent studies on B2B marketing suggest that organizational buyers may not be as rational as the prevailing perspective would assume, empirical evidence is still scarce. We argue that managers infer a product's functional risk from its price level, which is a behavioral response to price stimuli similar to what happens in the B2C context. We conducted an experiment manipulating the price, importance of the decision, and type of product (intense in search and credence attributes). Our findings narrow a research gap previously identified by various authors regarding the lack of empirical studies on behavioral aspects of B2B pricing, specifically related to the price-quality effect (a common heuristic used by shoppers in the B2C market, in which buyers perceive price to be a signal of the inherent qualities of a product). We identify potential boundary conditions that explain the relationship between price and perception of a product's functional risk.     

Behavioral assumptions and theory development: the case of transaction cost economics

From a critical realist perspective, I discuss the role played by behavioral assumptions in organization theories, and use transaction cost economics as an illustrative example. Core behavioral assumptions often constitute the foundation of the mechanismic explanations of a theory, and thus should play a pivotal role in theory development. I distinguish between assumption‐based and assumption‐omitted theory testing, and show that empirical research in transaction cost economics has been dominated by assumption‐omitted testing. To establish a solid foundation for a new theory, management researchers should pay more attention to assumption‐based testing. Copyright © 2006 John Wiley & Sons, Ltd.     

MARKET POWER AND PRICE MOVEMENTS OVER THE BUSINESS CYCLE*

This paper develops and tests implications of an oligopoly‐pricing model. The model predicts that during a demand expansion, the short run competitive price is a pure strategy Nash equilibrium but in a recession, firms set prices above the competitive price. Thus, price markups over the competitive price are countercyclical. Prices set during a recession are more variable than prices set in expansions because firms employ mixed strategy pricing in recessions. The empirical analysis utilizes Hamilton's time series switching regime filter to test the predictions of the model. Fourteen out of fifteen industries have fluctuations consistent with this oligopoly‐pricing model.     

工程总承包商的内部转移定价问题探讨

工程总承包是大型工程项目建设组织的一个重要发展方向,工程总承包商内部不同单位分别完成设计和施工工作,选择合适的转移定价策略对于项目运作效率和项目优化设计实现程度具有十分重要的意义。论文通过介绍转移定价理论,并分析工程总承包商的结构类型和行业特点,重点讨论了不考虑税收因素的工程总承包商内部转移定价,并在此基础上讨论了基于税务筹划的工程总承包商转移定价,提出工程总承包商应采用成本加收益分成的转移定价方法。     

油价理论回顾与展望

从国际原油交易定价入手,回顾和述评了关于"持有成本套利"和"现货溢价"的两种理论脉络和实证结论,结合原油期货合约具有实物商品和金融投资工具双重属性,讨论了从交易者行为入手,研究原油期货定价机制的主要思路和成果.强调后续研究应该坚持从考察交易者行为的角度来发掘油价形成的原因,把资本市场的变化、实体市场和期货市场同时纳入原油期货价格形成的研究中,才可能真正创造性地揭示油价决定和变化的内在规律,而对交易者行为"理性化"或"非理性化"的界定和争论可能直接影响未来对油价研究的结论     

Collusive Communication and Pricing Coordination in a Retail Gasoline Market

This paper studies how communication is used by a retail gasoline cartel in Australia to coordinate price increases, a role of communication in collusion not highlighted by Genesove and Mullin (Am Econ Rev 91(3): 379–398, 2001). A unique data set from the trial record allows for quantifying not only the pricing dynamics, but also the communication patterns. Both empirical and narrative evidence suggests the collusive communication and pricing behavior is well captured by the price cycle equilibrium of the Maskin and Tirole (Econometrica 56(3): 571–599, 1988) model.     

Price behavior in tight oligopoly

The study examines price behavior in tight oligopoly. The investigation proceeds from the premise that tacit cooperation is the rational response of firms comprising tight oligopoly. The study’s thesis is that cooperative conduct in tight oligopoly will reflect one of two general pricing patterns: (1) shared monopoly pricing, or (2) mark-up pricing. A unique empirical test of this dual price hypotheses is developed. The test focuses on the nature of price responses to cost and demand changes as reflected in a price equation that is estimated for each of fifty four-digit SIC industries. The study’s results indicate infrequent, but still notable, instances of shared monopoly pricing. More common is evidence of mark-up pricing, a general category within which demand proved to be significant in roughly half of the industries examined. Theoretical implications of these findings are discussed.     

Toward a behavioral theory of real options: Noisy signals,bias, and learning

Research Summary: We develop a behavioral theory of real options that relaxes the informational and behavioral assumptions underlying applications of financial options theory to real assets. To do so, we augment real option theory's focus on uncertain future asset values (prospective uncertainty) with feedback learning theory that considers uncertain current asset values (contemporaneous uncertainty). This enables us to incorporate behavioral bias in the feedback learning process underlying the option execution/termination decision. The resulting computational model suggests that firms that inappropriately account for contemporaneous uncertainty and are subject to learning biases may experience substantial downside risk in undertaking real options. Moreover, contrary to the standard option result, greater uncertainty may decrease option value, making commitment to an investment path more effective than remaining flexible. Managerial Summary: Executives recognize the need to make uncertain investments to grow their business while mitigating downside risk. The analogy between financial options and real corporate investments provides an appealing method to consider the practical challenge of such investment decisions. Unfortunately, the “real options” analogy seems to break down in practice. We identify how a second form of uncertainty confounds real options intuition, leading managers to overestimate the value of uncertain investments. We present a behavioral real options model that accounts for both forms of uncertainty and suggest how uncertainty interacts with behavioral bias in the option execution/termination decision. Our model facilitates assessment of the conditions under which investments in uncertain opportunities are usefully considered as real options, and provides a means to evaluate their attractiveness.     

Combining cartel penalties and private damage actions: The impact on cartel prices

In many countries antitrust enforcement by Competition Authorities through prosecution and the imposition of penalties is complemented in price-fixing cases by private damage actions, which should affect both cartel deterrence and the prices set by those cartels that do form. We show that the impact of combining penalties and damages on cartel prices is not clearcut, and depends on both the nature of the penalty regime and the way that damages are calculated. We demonstrate this by focusing on two ways of calculating damages that have been advocated in practice and two different forms of the widely used revenue-based penalty regime. When the simple form of revenue-based penalties is in force, the standard method of calculating damages worsens its harmful pricing effects, whereas the proposed alternative method of calculating damages can overturn them. When a more sophisticated form of revenue-based penalties is in operation, imposing damages will improve its beneficial pricing effects under both methods of damage calculation, but the alternative method is more effective. In all cases combining penalties and damages improves deterrence.     

R&D management responses to the environment: current theory and implications to practice and research

The environmental problems faced by society are often regarded as global in importance. The global imperatives linked to environmental concerns pose critical questions about the international management of R&D. This theme is developed in this paper which was initially written as the basis for a workshop on R&D management responses to the environmental challenge held as part of the 1992 Conference on Managing R&D Internationally at Manchester Business School.
The paper considers recent literature on R&D management responses to the environmental challenge drawn primarily from English language sources out extending beyond traditional R&D management literature. The intention was to identify current theories about R&D management and the general business context for R&D and to consider the implications of environmental concerns for R&D management practice.
The paper suggests that R&D management and the environment is still at a relatively early stage of development. Nevertheless, there is a demonstrable gap between the approaches to environmental problems adopted by R&D practitioners and those chosen by R&D theoreticians. This mirrors a more general gap between theory and practice seen in the basic R&D management literature.
In general, R&D management and the environment has been constructed in the literature as a set of tools and techniques, rather than a strategic management issue. However, there is a developing body of literature which links R&D management and environmental management in a more strategic way and focuses on the need to consider organizational as well as technological change.
The paper concludes that an important way forward for research in this area is to establish an R&D Management and Environment Focus Group to bridge the gap between theory and practice and to explore the application of environmental concepts to R&D management.     

Stories about men implementing and resisting new technologies

In this article the literature on masculinity, gender and technology or science provides the context for discussing two case studies where new information technology has recently been introduced. The empirical material is counter-intuitive to the general understanding that technology reflects and reinforces men's masculinity and the article provides a variety of theoretical interpretations for these findings.     

Behavioral Reasons for New Product Failure: Does Overconfidence Induce Overforecasts?

Efforts to organize and integrate research findings on new product performance determinants have lagged since the last significant overview paper appeared over a decade ago. Importantly, this literature has not considered entire categories of factors that are known to affect managerial decisions and behavior, namely those that pertain to decision‐makers' cognitive limitations and incentive structures. This research empirically investigates one specific cognitive distortion heretofore neglected in studies of new product commercialization—overconfidence, commonly defined in the literature as excessive belief in one's own abilities to generate superior performance. To lay the groundwork for subsequent exploration, the paper first introduces a behavioral model that both organizes well‐understood new product performance determinants and illuminates others heretofore not studied, namely incentive alignment and cognitive limitations and biases. The model summarizes extant research and allows development of research hypotheses related to overconfidence. The hypotheses and empirical investigation motivated by the model address two questions about the impact of overconfidence on new product commercialization activities. First, the study explores whether overconfidence is associated with overforecasting new product demand. Second, it evaluates two complementary mechanisms that may account for overconfidence‐induced overforecasts. The empirical findings are based on data generated in the course of management simulation workshops conducted among graduate students at three leading business schools in India. Three hundred thirty participants played individually four rounds of a computer‐based simulation game that involved decisions pertaining to new product development (including product formulation) and commercialization strategies. The decisions were captured and analyzed using statistical techniques. The results reveal that decision‐makers' overconfidence is associated with a higher likelihood of overforecasting new product sales. The observed effect is fully mediated by flawed tactical decisions that dampen demand, namely elevated product pricing. Sensitivity analyses show that these results are robust to a number of alternative explanations. However, the study finds no evidence implicating overconfident individuals as poor “innovators”—overconfident and nonoverconfident decision‐makers experienced comparable market demand for their new products. The paper concludes with a discussion of the results and provides specific recommendations for practice.