Price and Quality Decisions by Self-Serving Managers

Marco Bertini, Daniel Halbheer () and Oded Koenigsberg
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Marco Bertini: ESADE - Ramon Llull University
Daniel Halbheer: HEC Paris
Oded Koenigsberg: London Business School - Department of Marketing

No 1561, HEC Research Papers Series from HEC Paris

Abstract: We present a theory of price and quality decisions by managers who are self-serving. In the theory, firms stress 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 – as doing so is psychologically rewarding. The problem with biased attributions, however, is that they prompt biased decisions. We motivate this argument with evidence from one experiment and then develop a model to understand the cost of the bias under different market conditions. Counter to intuition, we find that firms in a competitive setting can profit from the self-serving nature of their managers.

Keywords: Causal reasoning; self-serving bias; strategic orientation; managerial decision-making (search for similar items in EconPapers)
JEL-codes: M30 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2025-05-06
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1561

DOI: 10.2139/ssrn.5216075

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