EconPapers    
Economics at your fingertips  
 

Market feedback, cost system choice and competitve pricing: the advantage of not being a leader

Eddy Cardinaels (), Filip Roodhooft, Luk Warlop and Gustaaf Van Herck
Additional contact information
Gustaaf Van Herck: Vlerick Leuven Gent Management School

Vlerick Leuven Gent Management School Working Paper Series from Vlerick Leuven Gent Management School

Abstract: This study experimentally investigates the value of cost report accuracy in an interactive pricing context. Market agents received feedback about their own profits via either a volume-based costing or a more accurate activity-based costing report. They also received a typical market report containing the performance of their rivals. While prior work suggested that market discipline and learning from salient competitors can overcome performance decrements due to inaccurate costing, our results imply that the corrective nature of market feedback depends on the decision maker's role in the competitive play. Compared to other participants, decision makers endowed with the role of a 'reputational' market leader are less effective in screening available market feedback because they predominantly fixate on their own cost data. Even when receiving biased volume-based costing, reputational leaders ignore valuable market signals of opponents having access to more accurate cost data. Consequently other market players can take advantage of them.

Pages: 33 pages
Date: 2004-04-20
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.vlerick.be/en/2688-VLK/version/default/ ... vlgms-wp-2004-06.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vlg:vlgwps:2004-06

Access Statistics for this paper

More papers in Vlerick Leuven Gent Management School Working Paper Series from Vlerick Leuven Gent Management School Contact information at EDIRC.
Bibliographic data for series maintained by Isabelle Vandenbroere ().

 
Page updated 2021-04-12
Handle: RePEc:vlg:vlgwps:2004-06