Price and Quality Decisions by Self-Serving Managers

39 Pages Posted: 16 Aug 2012 Last revised: 27 Aug 2018

See all articles by Marco Bertini

Marco Bertini

ESADE - Ramon Llull University

Daniel Halbheer

HEC Paris - Marketing

Oded Koenigsberg

London Business School - Department of Marketing

Date Written: August 24, 2018

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.

Keywords: Causal reasoning, self-serving bias, strategic orientation, managerial decision-making

Suggested Citation

Bertini, Marco and Halbheer, Daniel and Koenigsberg, Oded, Price and Quality Decisions by Self-Serving Managers (August 24, 2018). Available at SSRN: https://ssrn.com/abstract=2130414 or http://dx.doi.org/10.2139/ssrn.2130414

Marco Bertini

ESADE - Ramon Llull University ( email )

Avinguda de la Torre Blanca, 59
Sant Cugat del Vall├Ęs, 08172
Spain

Daniel Halbheer (Contact Author)

HEC Paris - Marketing ( email )

Paris
France

Oded Koenigsberg

London Business School - Department of Marketing ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

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