The impact of cognitive style, entrepreneurial attitudes and gender on competitive price responses

Abstract

PurposeWhile existing research has established various methods for pricing, the impact of a manager’s individual psychological profile on his/her price setting behavior is relatively unexamined. This is especially critical in the context of pricing decisions implemented in response to competitive forces. This paper aims to explore how a manager’s price responses to price cuts by a competitor are affected by his/her cognitive style, gender and entrepreneurial attitudes.Design/methodology/approachIn the first study, a simulation-based pricing environment is used in a lab setting to capture the dynamics of pricing decisions made in response to competitive price cuts. Participants’ price responses are captured in the form of the magnitude of price change implemented in a simulated environment in response to a competitor’s price reduction. The second study extends the scope of inquiry by using a national sample of business professionals and replicates and reinforces the findings of the first study by capturing participants’ attitudinal response on the decision to reduce prices in reaction to competitive price reductions.FindingsThe results of both studies indicate significant effects for cognitive style, gender and entrepreneurial attitudes. Individuals with stronger entrepreneurial attitudes and analytical cognitive styles, and females are less likely to engage in reactive price reductions.Research limitations/implicationsThe findings of this study indicate that managers’ propensity to engage in price changes in reaction to competitors can be linked to their psychological profile and gender.Practical implicationsGiven the existence of the relationship between price reactions of managers and their cognitive style and entrepreneurial attitudes, the training and development of pricing professionals may need to take these individual-level factors into account.Originality/valueThis is the first study that has linked managers’ propensity to engage in price changes in reaction to competitors to their gender and psychological profile.