Journal of Business Research 133 (2021) 231–241

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Journal of Business Research

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New product pricing in business markets: The role of psychological traits

Andreas Hinterhuber a, *, Mario Kienzler b, Stephan Liozu c
a
Department of Management, Ca’ Foscari University of Venice, Italy
b
Department of Management and Engineering, Linköping University, Linköping, Sweden
c
Weatherhead School of Management, Case Western Reserve University, Cleveland, OH, USA

A R T I C L E I N F O A B S T R A C T

Keywords: How does the bounded rationality of managers affect pricing? We examine this under-researched question by
New products examining how different psychological traits of managers relate to new product pricing practices and how these
Behavioral pricing pricing practices, in turn, relate to new product performance. To do so, we survey 302 American marketing,
Value-based pricing
sales, and pricing managers responsible for new product pricing decisions in business markets. Among others, our
Performance
Business markets
study identifies conformity and intuition as distinct psychological traits associated with pricing practices that
have a positive relationship with new product performance. The main contribution of this study is the empirical
demonstration that psychological traits offer valuable insights into how managers determine prices for new
products in business markets.

1. Introduction psychological aspects of pricing in business markets. Nevertheless,

The mind is the battleground. A terrain that is tricky and difficult to
understand. […] Mapping the mental battleground can give you an
enormous advantage. (Ries & Trout, 1986, pp. 44-45)
Pricing decisions for new products are challenging, given the
complexity of demand, competition, and costs information (see Ingen­
bleek, Debruyne, Frambach, & Verhallen, 2003; Monroe & Bitta, 1978).
Under such circumstances, managers’ subjective interpretation of in­
formation with pricing responsibility becomes a crucial factor in the
pricing process. In short, psychological aspects come into play (e.g.,
Hinterhuber, 2015).
In line with this argument, there has been a surge in interest in the
behavioral and psychological aspects of pricing, that is, the link between
managerial decision-making (e.g., individual differences, perceptions,
preferences, beliefs, and biases) and organizational outcomes related to
pricing (Hinterhuber & Liozu, 2017). However, much of this research is
conceptual (e.g., Hinterhuber, 2015; Iyer, Hong Xiao, Sharma, & Nich­
olson, 2015; Kienzler, 2018) or focuses on managerial pricing decisions
in consumer markets (e.g., Benoit, Kienzler, & Kowalkowski, 2020;
Bogomolova, Szabo, & Kennedy, 2017; Estelami & Nejad, 2017; Ruset­
ski, 2014). Except for a few studies (e.g., Hallberg, 2017; Kienzler, 2017;
Töytäri, Keränen, & Rajala, 2017; Töytäri, Rajala, & Alejandro, 2015),
there is surprisingly little empirical insight about many behavioral and
empirical research on behavioral and psychological aspects of pricing is
important to better understand how managers’ cognition, affect, and
motivation influence new product pricing.
We aim to fill this gap and advance the understanding of new product
pricing decisions in business markets by asking the following research
question: How do psychological traits of managers relate to new product
pricing practices, and how do these practices, in turn, relate to new product
performance? To do so, we build on the literature on bounded rationality
that suggests it is necessary to understand decision makers’ minds to
predict their behavior (see Simon, 1959).
Indeed, the results of our study show that understanding the minds of
managers can give companies a competitive advantage. In particular,
surveying over 300 American marketing, sales, and pricing managers
responsible for new product pricing decisions, we find that psycholog­
ical traits play a role in new product pricing in business markets. For
example, conformity, zero-sum beliefs, and intuition are related to how
managers emphasize different pricing practices. We also explore the
psychological traits associated with increased new product perfor­
mance: Conformity and intuition. Interestingly, tentative results from
this exploratory analysis suggest that conformity and intuition may play
a more complicated role in new product pricing; their relationship with
new product performance seems to be mediated not only by cost-based
but, surprisingly, also by value-based pricing. Finally, we find that cost-
based and value-based pricing have a positive relationship with new

* Corresponding author.
E-mail address: andreas.hinterhuber@unive.it (A. Hinterhuber).

https://doi.org/10.1016/j.jbusres.2021.04.076
Received 17 May 2020; Received in revised form 26 April 2021; Accepted 29 April 2021
Available online 11 May 2021
0148-2963/© 2021 Elsevier Inc. All rights reserved.
A. Hinterhuber et al.
product performance.
In so doing, we contribute to the predominantly conceptual work on
behavioral and psychological aspects of pricing in business markets. In
particular, showing that psychological traits predict new product pricing
practices and have downstream consequences for product performance
highlights the impact of individual managers in the pricing process. Our
results illustrate how psychological traits are related to managers’ in­
formation processing during the pricing process and offer new insights
into new product pricing practices. This insight marks a necessary
extension of the prior pricing literature that has only begun to empiri­
cally investigate behavioral and psychological aspects in business
markets.
2. Theoretical background
The current study draws on bounded rationality (Simon, 1957),
which posits that environmental complexity and limitations in their
abilities hinder humans from making fully rational decisions (Simon,
1959). Instead of the normative view of rational choice theory, bounded
rationality makes more realistic assumptions about human decision-
making. Humans do not consider all available information, have
inconsistent preferences, and rather try to achieve satisfactory than
maximum outcomes (Simon, 1959). Moreover, Simon (1967) has
pointed out that motivation and affect are—besides cogni­
tion—important influences on people’s information processing. Indeed,
others have also discussed the impact of motivation and affect in
managerial decision-making (e.g., Bazerman & Moore, 2009). Given
these and other assumptions, bounded rationality is useful in investi­
gating how managers actually make decisions (see March, 1978). Simon
(1959) argues for this circumstance in the following way:
It [is] hard to ignore the distinction between the objective environ­
ment in which the economic actor ‘really’ lives and the subjective
environment that he perceives and to which he responds. When this
distinction is made, we can no longer predict his behavior—even if
he behaves rationally—from the characteristics of the objective
environment; we also need to know something about his perceptual
and cognitive processes. (p. 256)
Hence, the central feature of bounded rationality is to understand
how affective, motivational, and cognitive processes guide the inter­
pretation of the environment; in short, how humans actually make
decisions.
Pricing has attracted substantial research interest (e.g., Kienzler &
Kowalkowski, 2017; Kuntner & Teichert, 2016; Leone, Robinson,
Bragge, & Somervuori, 2012). The existing pricing literature stresses the
complex nature of pricing decisions (Dutta, Zbaracki, & Bergen, 2003).
Prior research indicates that there are three main approaches to deter­
mine prices for new products: cost-based, competition-based, and value-
based pricing (Cannon & Morgan, 1990; Ingenbleek et al., 2003;
Ingenbleek, Frambach, & Verhallen, 2013; Nagle, Hogan, & Zale, 2011;
Shapiro & Jackson, 1978). To arrive at a price, managers engage in
pricing practices, that is, they collect, interpret, and integrate informa­
tion on cost, competition, and customer value (Ingenbleek et al., 2003).
Yet, existing research on pricing practices has primarily examined the
effectiveness of new product pricing decisions by analyzing internal and
external contingency factors, such as market or product characteristics
on the relative emphasis managers should put on cost, competition, and
customer value information when setting prices (Ingenbleek et al., 2003;
Ingenbleek et al., 2013).
Nevertheless, in line with bounded rationality, prior new product
pricing research also highlights that managers do not consider all
available information (Ingenbleek et al., 2013) and interpret the infor­
mation they use during the pricing process (Ingenbleek et al., 2003).
Indeed, an emerging stream of research highlights the influence of
affect, motivation, and cognition on managers’ price-related decision-
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Journal of Business Research 133 (2021) 231–241
making through cognitive biases (Hinterhuber, 2015; Iyer et al., 2015;
Kienzler, 2018), intuition (Benoit et al., 2020; Bogomolova et al., 2017;
Estelami & Nejad, 2017; Rusetski, 2014), and individual differences
(Kienzler, 2017; Töytäri et al., 2017), for instance.
Moreover, this emerging stream of research provides insights into a
number of psychological traits that potentially influence the information
processing of bounded rational managers when engaging in different
pricing practices to determine prices for the first time. These psycho­
logical traits concern implicit beliefs held by managers about their
ability to control external events (Hinterhuber, 2004; Kienzler, 2018),
the tendency to conform to the behavior of others (Hinterhuber, 2015;
Kienzler, 2018), the aversion to ambiguity (Kienzler, 2018; Urbany,
2001), the tendency to view own interests as opposed to interests of
other parties (Hinterhuber, 2004; Kienzler, 2018), and the reliance on
intuition in the decision-making process (Estelami & Nejad, 2017;
Rusetski, 2014).
3. Hypotheses development
Psychological traits can profoundly impact how humans make de­
cisions, as prior research across various contexts shows. We discuss their
potential relevance in and impact for the pricing practices bounded
rational managers engage in when setting prices for new products in the
following sections. Fig. 1 shows our conceptual model and the
hypotheses.
3.1. Perceived lack of control and pricing practices
Perceived lack of control refers to the extent to which individuals
perceive themselves to be unable to control their destiny (see also
Rotter, 1966). According to Rotter (1966), an external locus of control
indicates the perception that events are largely outside one’s control. An
internal locus of control indicates the perception that one’s actions in­
fluence external events. In the context of pricing, the perceived ability to
control external events influences pricing decisions. For instance,
research indicates that many managers do not believe in their ability to
influence industry price levels and thus focus on cost information when
setting prices (Hinterhuber, 2004). Furthermore, research indicates that
most managers base their pricing decisions on information about costs
or competition (Hinterhuber & Liozu, 2012; Liozu, 2017) due to a
perceived lack of control (Dolan & Simon, 1996). An emphasis on value-
based pricing, by contrast, requires self-confidence and the ability to
influence customer perceptions of value and price (Nagle et al., 2011).
This line of reasoning leads the current literature to propose, albeit
without empirical investigation, that perceived lack of control has a
negative relation with value-based pricing (Kienzler, 2018). Hence, we
hypothesize:
H1: Perceived lack of control is positively related to cost-based pricing.
H2: Perceived lack of control is positively related to competition-based
pricing.
H3: Perceived lack of control is negatively related to value-based pricing.
3.2. Conformity and pricing practices
Conformity is the tendency to agree with or to act in accordance with
others. Conformity is driven by social pressure and the need for
consensus (Asch, 1955). Thus, it can be seen as a type of social heuristic
(see Gigerenzer & Gaissmaier, 2011). In the context of new product
pricing decisions, bounded rationality suggests that conformity leads
managers to either identify competitors in the external environment or a
specific market norm (e.g., cost-plus pricing) as a relevant reference
point. Thus, managers who conform overemphasize a particular type of
information. Prior pricing research provides further insights into a
possible relationship between conformity and different pricing prac­
tices. For instance, research indicates that most companies focus on cost-
A. Hinterhuber et al.
Fig. 1. Conceptual model and hypotheses.
based and competition-based pricing (Hinterhuber & Liozu, 2012; Liozu,
2017), likely due to managers’ need to conform (Hinterhuber, 2015).
Indeed, in its most extreme form, conformity manifests itself in simply
copying the behavior of major competitors (Dolan & Simon, 1996). Prior
research also indicates that value-based pricing is not the norm. In this
regard, Hinterhuber (2015) suggests the low adoption of value-based
pricing might be due to the need to conform. Put differently, confor­
mity decreases the focus on unfamiliar pricing practices that emphasize
customers’ perceived value. Thus, we hypothesize:
H4: Conformity is positively related to cost-based pricing.
H5: Conformity is positively related to competition-based pricing.
H6: Conformity is negatively related to value-based pricing.
3.3. Ambiguity aversion and pricing practices
Ambiguity aversion is the tendency to dislike uncertain situations.
The literature on bounded rationality indicates that managers tend to
avoid uncertain and vague situations (Cyert & March 1963). Further­
more, Simon (1959) highlights the importance of considering decision
makers’ perceptions of uncertainty to predict their behavior. In the
context of new product pricing practices, the information that managers
encounter exhibits a varying degree of uncertainty. For instance, infor­
mation about costs and competitors is more certain and objective than
information about customers’ perceived value (see Kienzler, 2017).
Hence, prior research has suggested a positive relation between ambi­
guity aversion and preferences for cost-based pricing and competition-
based pricing (Urbany, 2001). In stark contrast, value is by definition
always uncertain and subjective (Hinterhuber, 2017; Nagle et al., 2011)
and requires managers to deal with ill-structured and uncertain infor­
mation. Hence, we hypothesize:
H7: Ambiguity aversion is positively related to cost-based pricing.
H8: Ambiguity aversion is positively related to competition-based pricing.
H9: Ambiguity aversion is negatively related to value-based pricing.
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Journal of Business Research 133 (2021) 231–241
3.4. Zero-sum belief and pricing
A zero-sum belief is a view that one party’s win needs to results in the
other party’s loss. Hinterhuber (2004) points out that many managers
perceive pricing as a means to divide gains among themselves and the
customer, making it a zero-sum game. Thus, managers may focus on
costs that have to be covered rather than customers that need to be
understood. Likewise, an overemphasis of competition-related measures
such as market share indicates a narrow focus. In fact, ample evidence
suggests that managers are obsessed with beating the competition
(Armstrong & Collopy, 1996; Arnett & Hunt, 2002). Simon (1959)
stresses that bounded rationality entails that humans engage in “an
active process involving attention to a very small part of the whole and
exclusion […] of almost all that is not within the scope of attention” (p.
273). Thus, managers with a zero-sum belief may focus their attention
on the ostensible win-lose structure of pricing. However, research sug­
gests that customer value increases customer satisfaction and company
profits jointly (Hinterhuber & Liozu, 2014). By focusing on customer-
end benefits, value-based pricing allows increasing the overall pie size
(Anderson, Kumar, & Narus, 2007; Sawhney, 2004) and enables
win–win arrangements between suppliers and customers. Thus, we
hypothesize:
H10: Zero-sum belief is positively related to cost-based pricing.
H11: Zero-sum belief is positively related to competition-based pricing.
H12: Zero-sum belief is negatively related to value-based pricing.
3.5. Intuition and pricing practices
Intuition refers to thought processes that are automatic, unconscious,
or emotional (Hodgkinson, Sadler-Smith, Burke, Claxton, & Sparrow,
2009). Intuition can rely on heuristics (Rusetski, 2014), for instance, in
the form of simple rules of thumb regarding cost and competitor infor­
mation, such as “‘The lower the cost, the higher the markup,’ [and]
‘Price slightly below the market share leader,’” respectively (Hinter­
huber, 2015, p. 70). The use of simplified rules is in line with bounded
rationality, which suggests that managers use heuristics to achieve good
enough results (see Simon, 1959). Thus, it is not surprising that the cost-
A. Hinterhuber et al. Journal of Business Research 133 (2021) 231–241

plus heuristic (Urbany, 2001)—an emphasis on cost information—is Table 1

widespread because it feels right. Furthermore, more intuitive managers Sample characteristics.
react stronger to competitors’ price cuts; they reduce their prices more Aspects n %
than less intuitive managers (Estelami & Nejad, 2017). Findings by
Company type
Rusetski (2014) also imply that intuition leads many managers to match Manufacturing firm 60 20
competitors’ prices. Taken together, this indicates a link between intu­ Service organization 130 43
ition and a focus on cost and competitor information. In contrast, value- Distribution/retail company 112 37
based pricing relies heavily on rigorous, evidence-based analysis to Company size (no. employees)
Less than 250 159 53
determine customers’ willingness to pay (Nagle et al., 2011). In this 251 to 500 37 12
regard, an emphasis on customer value requires managers to establish 501 to 1000 32 11
the right information sources (Ingenbleek, 2007), not only focusing on 1,001 to 10,000 48 16
their intuition regarding customer value. Hence, we hypothesize: Over 10,000 26 9
Company age
Less than 5 years old 46 15
H13: Intuition is positively related to cost-based pricing. 5 to less than 10 years old 65 22
H14: Intuition is positively related to competition-based pricing. 10 to less than 25 years old 82 27
H15: Intuition is negatively related to value-based pricing. 25 to less than 50 years old 68 23
50 years old or greater 41 14
Company headquarter
In the Americas 293 97
3.6. Pricing practices and new product performance Other 9 3
Organizational function
The relationship between different pricing practices and product and Marketing 105 35
company performance has been the subject of several empirical studies Sales 150 50
Pricing 47 16
(e.g., Ingenbleek et al., 2003; Ingenbleek et al., 2013; Liozu & Hinter­
huber, 2013b) that are, broadly, in agreement with the following: Value- N = 302; percentage might not sum to 100 percent due to rounding.
based pricing has a positive relationship with product and company
performance, while other pricing practices can be beneficial in some 4.2. Measures
circumstances. For instance, an understanding of costs and customers’
perceived value gives managers an understanding of the minimum and All measures are based on established scales but were adapted to fit
maximum price they can charge, allowing them to calibrate new product the context of the current study. Importantly, we asked the respondents
prices against these two boundaries (see Ingenbleek et al., 2003). Cost to think about one specific new product or one specific new service they
information is also essential to understand minimum price levels for new set the price for within the last one or two years when answering the
products and has thus profit implications (Ingenbleek et al., 2003). pricing practices and new product performance questions.
While emphasizing competition-based pricing may be beneficial under
some specific circumstances for new product performance (Ingenbleek 4.2.1. Perceived lack of control
et al., 2003; Ingenbleek et al., 2013), overall, it seems to have a negative We measure perceived lack of control with a five-item scale (1 =
relation with company performance (Liozu & Hinterhuber, 2013b). strongly disagree; 7 = strongly agree) adapted from Hodgkinson (1992).
Hence, it has been argued that an overemphasis on competitive infor­ Respondents indicated the extent to which they agree or disagree with
mation is dangerous (Hinterhuber & Liozu, 2012). We hypothesize: each item.

H16: Cost-based pricing is positively related to new product performance. 4.2.2. Conformity
H17: Competition-based pricing is negatively related to new product We use a five-item scale adapted from Goldsmith, Clark, and Lafferty
performance. (2005) to measure conformity. The six-point scale is characterized by
H18: Value-based pricing is positively related to new product one adjective reflecting conformity and one reflecting disconformity on
performance. each respective end of the scale. We asked respondents to consider how
they behave in a typical business situation and to rate themselves
4. Method accordingly on the scale.

4.1. Data collection and sampling description 4.2.3. Ambiguity aversion

We commissioned Qualtrics, a leading global provider of online
panel data, to recruit suitable respondents for this survey from April 9 to
April 27, 2018. Prior to data collection, we decided on a target sample
size of 300. We obtained responses from 302 managers working for
business-to-business companies that operate in the United States (see
Table 1 for more information). All respondents have been involved in
pricing decisions for a new product or a new service in the last two years.
Hence, respondents are qualified.
To ensure data quality, we included two attention check questions
within the online survey. Specifically, we used two items embedded in
two different survey blocks that were exactly formatted as preceding and
succeeding items and asked respondents to give a particular response to
indicate that they were paying attention. Before data analysis, re­
spondents who did not pass these attention checks were automatically
excluded and replaced. Similarly, we asked the panel provider to replace
inattentive respondents (e.g., straight liners, speeders) before data
analysis.
We measure ambiguity aversion with a five-item scale (1 = strongly
disagree; 7 = strongly agree) adapted from McLain (2009). Respondents
indicated the extent to which they agree or disagree with each item.
4.2.4. Zero-sum belief
We measure zero-sum beliefs with a five-item scale (1 = strongly
disagree; 7 = strongly agree) adapted from Różycka-Tran, Boski, and
Wojciszke (2015). Respondents indicated the extent to which they agree
or disagree with each item.
4.2.5. Intuition
We measure intuition with a five-item scale (1 = strongly disagree; 7
= strongly agree) adapted from Scott and Bruce (1995). Respondents
indicated the extent to which they agree or disagree with each item.
4.2.6. Cost-based pricing
We measure cost-based pricing with a four-item scale (1 = very weak
influence; 7 = very strong influence) developed Ingenbleek et al. (2003).

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Respondents indicated the extent to which different information related Table 2

to costs influenced the price of the new product/service. Overview of constructs.
Construct FL
4.2.7. Competition-based pricing
New product performance (CR ¼ 0.86; Alpha ¼ 0.80; AVE ¼ 0.56)
We measure competition-based pricing with a six-item scale (1 = 1. The degree to which the product/service satisfies a customer want or need 0.65
very weak influence; 7 = very strong influence) developed by Ingenbleek as compared with the objective or expectation
et al. (2003). Respondents indicated the extent to which different in­ 2. Sales to current customers as compared with the objective or expectation 0.80
formation related to competition influenced the price of the new prod­ 3. Sales to new customers as compared with the objective or expectation 0.78
4. Market share as compared with the objective or expectation 0.79
uct/service. 5. Degree to which the product/service offers a competitive advantage as 0.72
compared with the objective or expectation
4.2.8. Value-based pricing Cost-based pricing (CR ¼ 0.85; Alpha ¼ 0.77; AVE ¼ 0.59)
We measure value-based pricing with a five-item scale (1 = very weak 1. The variable costs of the product/service 0.82
2. The price necessary to break-even 0.67
influence; 7 = very strong influence) developed by Ingenbleek et al.
3. The investments in the new product/service 0.81
(2003). Respondents indicated the extent to which different information 4. The share of fixed costs in the cost price 0.76
related to customer value influenced the price of the new product/ Competition-based pricing (CR ¼ 0.91; Alpha ¼ 0.88; AVE ¼ 0.63)
service. 1. The price of competitors’ products/services 0.78
2. The competitors’ current pricing strategy 0.81
3. The estimation of competitors’ strength to react 0.75
4.2.9. New product performance 4. The market structure (number and strength of competitors) 0.78
We measure new product performance with a five-item scale (1 = 5. The degree of competition in the market 0.80
much worse/lower than competitors; 7 = much better/higher than competi­ 6. The competitive advantage of competitors in the market 0.83
tors) adapted from (Ingenbleek et al., 2013). Respondents indicated the Value-based pricing (CR ¼ 0.83; Alpha ¼ 0.73; AVE ¼ 0.55)
1. The advantages the new product/service offers to customers 0.76
extent to which the new product/service achieved a number of financial
2. The advantages of the product/service compared to substitutes 0.73
and non-financial outcomes during the first 12 months after its launch. 3. The advantages of the product/service compared to competitors’ products/ 0.73
services
4.2.10. Control variables 4. The customer’s perceived value of the product/service D
We also control for a number of other variables, namely, company 5. The balance between advantages of the product/service and its price 0.74
Perceived lack of control (CR ¼ 0.81; Alpha ¼ 0.77; AVE ¼ 0.52)
type, size and age, location of company headquarters, and organiza­
1. There is very little my company can do in order to change the rules of 0.45
tional function. All these control variables are categorical in nature (see competition in our industry
Table 1). Thus, after data collection, we created dummy variables that 2. To a great extent, the competitive environment in which my company 0.93
we include in the model. operates is shaped by forces beyond its control
3. There is little point in engaging in detailed strategic analyses and planning 0.65
because often events occur that my company cannot control
5. Analyses and results 4. My company is able to influence the basis upon which it competes with D
other firms (R)
Considering the exploratory nature of this study and our goal to build 5. Market opportunities in my industry are largely predetermined by factors 0.77
theory, partial least square structural equation modeling (PLS-SEM) is beyond my company’s control
Conformity (CR ¼ 0.86; Alpha ¼ 0.79; AVE ¼ 0.61)
an appropriate analytical technique (Hair, Hult, Ringle, & Sarstedt,
1. Compliant– Defiant (R) 0.78
2014). In particular, Hair et al. (2014) state: “In situations where theory 2. Agreeing– Disagreeing (R) 0.75
is less developed, researchers should consider the use of PLS-SEM” (p. 3. Cooperative – Uncooperative (R) 0.83
14). In fact, in contexts where the focus is more on exploration than 4. Opposing – Accommodating D
5. Adapting – Inflexible (R) 0.74
confirmation, PLS-SEM is preferable to co-variance-based structural
Ambiguity aversion (CR ¼ 0.80; Alpha ¼ 0.75; AVE ¼ 0.52)
equation modeling (Hair, Howard, & Nitzl, 2020). Given the nascent 1. I try to avoid business situations that are ambiguous 0.75
empirical research of behavioral and psychological aspects of pricing in 2. I avoid business situations that are too complicated for me to easily 0.41
business markets (e.g., Hinterhuber, 2015), PLS-SEM is the appropriate understand
choice. Additionally, PLS-SEM is preferable with complex models (see 3. I try to avoid business problems that don’t seem to have only one “best” D
solution
Hair et al., 2020; Hair et al., 2014). Considering that our model contains
4. I dislike ambiguous business situations 0.75
nine main variables and several control variables, it is complex. We use 5. I prefer a business situation in which there is some ambiguity (R) 0.88
SmartPLS 3 (Ringle, Wende, & Becker, 2015) to estimate the conceptual Zero-sum belief (CR ¼ 0.89; Alpha ¼ 0.85; AVE ¼ 0.63)
model. In the following, we assess the measurement model, discuss 1. Successes of some companies are usually failures of others 0.75
2. If someone gets richer, it means that somebody else gets poorer 0.77
common method bias and endogeneity, estimate the structural model,
3. Business is so devised that when somebody gains, others have to lose 0.87
and then evaluate the overall model. Since we have very few missing 4. Business is like tennis – a person wins only when others lose 0.77
values, we use SmartPLS 3’s mean replacement function. 5. When some companies are making losses, it means that other companies 0.79
are making gains
5.1. Measurement model Intuition (CR ¼ 0.89; Alpha ¼ 0.85; AVE ¼ 0.63)
1. When making business decisions, I rely upon my instincts 0.81
2. When I make business decisions, I tend to rely on my intuition 0.86
We start by assessing the constructs’ reliability (i.e., Cronbach’s 3. I generally make business decisions that feel right to me 0.81
alpha and composite reliability) and validity (i.e., average variance 4. When I make a business decision, it is more important for me to feel that the 0.56
extracted [AVE]). Initially, some of the constructs fell below the com­ decision is right than to have a rational reason for it
5. When I make a business decision, I trust my inner feelings and reactions 0.89
mon cut-off values of 0.70 and 0.50, respectively. Following Hair et al.
(2014) recommendation, we deleted indicators below 0.40 and low- Notes: FL = Factor Loading; CR = Composite Reliability; AVE = Average
loading indicators until the constructs’ reliability and validity excee­ Variance Extracted; D = Deleted; (R) = reverse coded.
ded the cut-off values. In total, we deleted four indicators, one each from
the value-based pricing, perceived lack of control, conformity, and Next, we check for discriminant validity with several commonly
ambiguity aversion scale. After this procedure, all constructs have employed methods. First, none of the indicators’ cross-loadings exceeds
Cronbach’s alpha values and composite reliabilities above 0.70 and AVE their outer loadings. Second, the Fornell–Larcker criterion (Fornell &
values above 0.50 (see Table 2). Hence, the constructs display satisfac­ Larcker, 1981) is met since none of the constructs’ correlation with
tory reliability and validity according to standard assessment criteria.

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another construct exceeds the square root of its AVE (see Table 3).
Finally, since cross-loadings and the Fornell–Larcker criterion do not
always accurately assess discriminant validity, we follow the recent
literature and also employ the heterotrait-monotrait ratio (HTMT) of
correlations (Henseler, Ringle, & Sarstedt, 2015). The HTMT evaluates
“the average of the heterotrait-heteromethod correlations (i.e., the
correlations of indicators across constructs measuring different phe­
nomena), relative to the average of the monotrait-heteromethod corre­
lations (i.e., the correlations of indicators within the same construct)”
and is used to examine whether it is below a specific threshold (Henseler
et al., 2015, p. 121). The HTMT of the constructs shown in Table 3
ranges from 0.08 to 0.69 and is thus below the HTMT 0.90 threshold.
Taken together, these results indicate discriminant validity (Hair et al.,
2014).
5.2. Common method bias and endogeneity
Common method bias might be a concern in cross-sectional data
collected from a single informant (see Podsakoff, MacKenzie, Lee, &
Podsakoff, 2003). First, we use Harman’s single-factor test to assess
common method bias. We subject all indicators to exploratory factor
analysis (EFA) and inspect the unrotated factor solution; no single factor
appears, and the first factor does not explain a majority of the variance
(Podsakoff et al., 2003). Second, we follow Lindell and Whitney (2001)
approach and use the smallest positive correlation (0.001; between
perceived lack of control and new product performance) to assess the
extent of common method variance and adjust for it. The results of the
adjusted correlations (see Table 3, above the diagonal) indicate that
common method bias does not seem to be a major issue in our sample.
Finally, following recent suggestions (Hult et al., 2018), we address
endogeneity by including suitable control variables in our model,
capturing the endogenous influence of respondent, firm, and industry
differences on our results.
5.3. Structural model
We use 5,000 bootstrapping re-samples and one-tailed tests to esti­
mate the significance of the structural model’s standardized path co­
efficients (ß) (see Fig. 2). Since PLS-SEM does not make distributional
assumptions, bootstrapping is used to allow for significance testing of
these path coefficients (Hair et al., 2014). In case of results in opposition
to our predictions, we assess them in an exploratory manner (see notes
under Table 4). Perceived lack of control is not significantly related to
cost-based (H1, ß = 0.05, p = .27), competition-based (H2, ß = 0.09, p =
.13), and value-based pricing (H3, ß = − 0.03, p = .35). Hence, none of
our hypotheses for perceived lack of control are significant, yet all hy­
potheses receive directional support.
Conformity is positively and significantly related to cost-based (H4, ß
= 0.16, p = .001), competition-based (H5, ß = 0.08, p = .07), and value-
based pricing (H6, ß = 0.25, p < .001). Thus, the findings support the
hypotheses that managers’ tendency to conform is positively related to
cost- and competition-based pricing. Contrary to our hypothesis, con­
formity has a positive relation with value-based pricing.
Ambiguity aversion is negatively and significantly related to cost-
based pricing (H7, ß = − 0.13, p = .02), to competition-based pricing
(H8, ß = − 0.15, p = .02), and not significantly related to value-based
pricing (H9, ß = − 0.05, p = .24). Surprisingly, none of our hypotheses
for ambiguity aversion are supported. Nevertheless, we find directional
support for the circumstance that the more ambiguity averse managers
are, the less they emphasize value-based pricing in their company’s
pricing practices.
Zero-sum beliefs are not significantly related to cost-based pricing
(H10, ß = 0.03, p = .36), are positively and significantly related to
competition-based pricing (H11, ß = 0.14, p = .03), and are positively
and significantly related to value-based pricing (H12, ß = 0.11, p = .04).
Thus, the findings support the predicted relationship between zero-sum
beliefs and competition-based pricing. We also find directional support
for zero-sum beliefs and cost-based pricing. While contrary to our hy­
pothesis, zero-sum beliefs have a positive relation with value-based
pricing. Yet, the results do not hold when adjusting for multiple com­
parisons (see Table 4).
Intuition is positively and significantly related to cost-based (H13, ß =
0.15, p = .002), competition-based (H14, ß = 0.17, p = .001), and value-
based pricing (H15, ß = 0.14, p = .007). Thus, the findings support the
predicted relationships between managers’ intuition and cost-based and
competition-based pricing. Contrary to our hypothesis, intuition has a
positive relation with value-based pricing.
Finally, we examine the relations between pricing practices and new
product performance. Cost-based pricing is positively and significantly
related to new product performance (H16, ß = 0.17, p = .013),
competition-based pricing is not significantly related to new product
performance (H17, ß = .03, p = .37), and value-based pricing is positively
and significantly related to new product performance (H18, ß = 0.21, p
= .005). Thus, the findings support the predicted relationships between
cost-based and value-based pricing and new product performance. It
appears that emphasizing competition-based pricing does not have any
significant relation with new product performance.
5.4. Model evaluation
The model explains a fair amount of variance: 19% in cost-based,
19% in competition-based, and 14% in value-based pricing (see
Table 4). Moreover, the model explains 16% of the variance in new
product performance. Collinearity appears to not influence our results as
the variance inflation factor (VIF) is below 3 (Hair et al., 2020); it ranges
between 1.05 and 2.53. Finally, to assess the model’s predictive rele­
vance, we estimate Stone-Geisser’s Q2 (Geisser, 1974; Stone, 1974). The
structural model displays predictive relevance (see Table 4) for the

Table 3
Correlation matrix.
Constructs M SD 1. 2. 3. 4. 5. 6. 7. 8. 9.

1. New product performance 5.34 0.91 0.75 0.29 0.26 0.31 0.00 0.23 − 0.11 0.09 0.20
2. Cost-based pricing 5.43 1.13 0.29 0.77 0.53 0.47 0.05 0.18 − 0.18 0.11 0.16
3. Competition-based pricing 5.17 1.18 0.26 0.53 0.79 0.56 0.13 0.08 − 0.18 0.23 0.20
4. Value-based pricing 5.52 0.99 0.31 0.47 0.56 0.74 0.01 0.27 − 0.07 0.15 0.15
5. Perceived lack of control 4.01 1.40 0.00 0.05 0.13 0.01 0.72 − 0.06 0.05 0.19 0.10
6. Conformity 4.74 0.89 0.23 0.18 0.08 0.27 − 0.06 0.78 − 0.04 0.02 0.02
7. Ambiguity aversion 4.06 1.21 − 0.11 − 0.17 − 0.18 − 0.07 0.06 − 0.04 0.72 0.00 − 0.09
8. Zero-sum belief 3.82 1.31 0.09 0.11 0.23 0.15 0.20 0.02 0.00 0.79 0.07
9. Intuition 5.22 1.02 0.21 0.16 0.20 0.15 0.10 0.02 − 0.09 0.07 0.79

Note: N = 302; M = mean; SD = standard deviation. The square root of AVE is reported in bold on the diagonal; unadjusted construct correlations are reported below
and adjusted ones above the diagonal (see Lindell & Whitney, 2001). The adjusted correlation coefficients show the extent of common method bias in the data. The
adjusted correlation coefficients that differ from their unadjusted counterparts are underlined. The table omits correlation for the control variables for clarity. Cor­
relations ≥±0.10 are significant at 0.10 (two-tailed).

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A. Hinterhuber et al.
Fig. 2. Structural model with path coefficients of non-rejected predictions.
endogenous constructs since their Q2 values are all above 0 (Hair et al.,
2014).
5.5. Post-hoc analysis: Mediation of pricing practices1
In an additional model, we include paths from the predictors to new
product performance to investigate these direct effects and potential
mediation via the three pricing practices. Since this analysis does not
test a priori predictions, we use two-tailed tests. The results in Table 5
show that only conformity (ß = 0.17, p = .003) and intuition (ß = 0.16, p
= .006) have a significant direct effect on new product performance.
These direct effects are partially mediated by cost-based and value-
based pricing. Additionally, the analysis shows an indirect only media­
tion of ambiguity aversion on new product performance via cost-based
pricing and an indirect only mediation of zero-sum beliefs on new
product performance via value-based pricing (see bold confidence in­
tervals in Table 5 for mediation).
6. Discussion
Building on the theory of bounded rationality (e.g., Simon, 1957,
1959, 1967) and prior research on behavioral and psychological aspects
in pricing (e.g., Hinterhuber, 2015; Iyer et al., 2015; Kienzler, 2018), we
find evidence that managers’ psychological traits are related to their
emphasis on different pricing practices. While the theory of bounded
rationality has been used in prior research on behavioral and psycho­
logical aspects of pricing (e.g., Hallberg, 2017; Iyer et al., 2015; Kien­
zler, 2018), we are among the first to empirically show its impact on
pricing decisions. In particular, we find support for our predictions that
both conformity and intuition are positively related to cost-based and
competition-based pricing. Similarly, zero-sum beliefs have a positive
relation with competition-based pricing.
These findings are in line with the premise of bounded rationality
that humans do not consider all available information (Simon, 1957)
and the notion that researchers instead need to understand the processes
1
We thank the editor for suggesting this exploratory analysis.
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Journal of Business Research 133 (2021) 231–241
through which they actually make decisions (Simon, 1959). More spe­
cifically, Foss (2003) has argued that research ought to add content to
the “thin” notion of bounded rationality: to provide richer illustrations
of bounded rational decision-making. We do so by demonstrating how
managers’ psychological traits allow us to predict their focus on some
information (i.e., on cost, competition, or customer value). For example,
managers with a stronger zero-sum belief seem to simplify complex
market dynamics and buyer–supplier relationships by focusing on in­
formation about rivals when setting prices.
Yet, we also found a number of unexpected relationships between
psychological traits and pricing practices. First, we found a positive
relationship between conformity and value-based pricing. A tentative
explanation is that conformity groups together qualities mirroring a
customer service orientation, which is characterized by being responsive
and adaptive to customers’ needs. Service orientation is an essential part
of a value-based approach to business as offerings are chosen or adapted
to customers’ perceived value. Second, ambiguity aversion had a
negative relation with cost-based and competition-based pricing. Under
certain circumstances, ambiguity aversion may plausibly reduce the
focus on cost and competitive information. For instance, in the context
of radically new products, cost information may be highly ambiguous or
simply unavailable (see Christen, 2005). Thus, bounded rational man­
agers’ ambiguity aversion could, under such circumstances, lead to
negative relations with cost-based and competition-based pricing.
Finally, managers’ intuition had a positive relation with value-based
pricing. While unexpected, the result is compatible with prior research
finding no relationship between managers’ rationality and firm perfor­
mance (Liozu & Hinterhuber, 2013a), thus allowing for the possibility
for a positive but untested relationship between intuition and perfor­
mance. As already noted, we find a positive relationship between intu­
ition and cost-based and competition-based pricing. Intuition involves
“affectively charged judgments that arise through rapid, nonconscious,
and holistic associations” (Dane & Pratt, 2007, p. 40), but also “a
cognitive conclusion based on a decision maker’s previous experiences”
(Burke & Miller, 1999, p. 92). Taken together, our findings point to the
possibility that intuition allows managers to quickly process cost and
competitive information and—at the same time—understand complex
customer value information based on experience and insight. Again,
A. Hinterhuber et al. Journal of Business Research 133 (2021) 231–241

Table 4 Table 4 (continued )

Results of hypothesis testing. No. Path Direction β t- p- Support
No. Path Direction β t- p- Support values values
values values
R2/Q2 for 0.14/
H1 Perceived lack + 0.05 0.62 0.27 Value-based 0.05
of control → pricing
Cost-based R2/Q2 for New 0.16/
pricing product 0.07
H2 Perceived lack + 0.09 1.11 0.13 performance
of control →
Controls: Included (company type, size, and age, location of company head­
Competition-
based pricing quarter, and organizational function).
H3 Perceived lack – − 0.03 0.38 0.35 Notes: The t-values are estimated using the bootstrap resampling procedure in
of control → SmartPLS (302 cases. 5,000 runs). * p < .10; ** p < .05; *** p < .01; **** p <
Value-based .001 (one-tailed). ✔ indicates significant path in predicted direction ↪indicates
pricing significant path in opposite direction (note, p-values of these paths are taken
H4 Conformity → + 0.16*** 2.99 0.001 ✔ directly from SmartPLS and are not corrected for the fact that the path is in
Cost-based opposition to our prediction. However, the significance holds for all these paths
pricing
[at or below 0.10, two-tailed test, and adjusting for multiple comparisons, that
H5 Conformity → + 0.08* 1.46 0.07 ✔
Competition-
is, two], except zero-sum belief → value-based pricing). Q2 are calculated with
based pricing an omission distance of 7.
H6 Conformity → – 0.25**** 4.55 <0.001 ↪
Value-based
pricing Table 5
H7 Ambiguity + − 0.13** 2.04 0.02 ↪ Mediation analyses.
aversion →
Cost-based Indirect effect on new product performance
pricing via…
H8 Ambiguity + − 0.15** 1.98 0.02 ↪ Cost-based Competition- Value- Direct effect on
aversion → pricing based pricing based new product
Competition- pricing performance
based pricing
H9 Ambiguity – − 0.05 0.07 0.24 Predictor [LB, UB] [LB, UB] [LB, UB] Path (sig.)
aversion → Perceived [− 0.007, [− 0.009, [− 0.033, − 0.02 (0.784)
Value-based lack of 0.031] 0.028] 0.011]
pricing control
H10 Zero-sum + 0.03 0.37 0.36 Conformity [0.002, [− 0.009, [0.008, 0.17 (0.003)
belief → Cost- 0.049] 0.020] 0.084]
based pricing Ambiguity [¡0.048, [− 0.029, [− 0.035, − 0.05 (0.450)
H11 Zero-sum + 0.14** 1.96 0.03 ✔ aversion ¡0.002] 0.017] 0.007]
belief → Zero-sum [− 0.008, [− 0.017, [0.002, − 0.01 (0.832)
Competition- belief 0.025] 0.031] 0.053]
based pricing Intuition [0.002, [− 0.022, [0.003, 0.16 (0.006)
H12 Zero-sum – 0.11** 1.75 0.04 ↪ 0.046] 0.032] 0.061]
belief →
Note: Lower bound (LB) and upper bound (UB) of the 90% confidence interval
Value-based
(CI) of the path coefficients are shown.
pricing
H13 Intuition → + 0.15*** 2.84 0.002 ✔ We use the bias-corrected and accelerated (BCa) bootstrap procedure and two-
Cost-based tailed tests. The 90% CI’s marked in bold do not contain zero. 5,000 bootstrap
pricing re-samples were used to calculate the values shown. The table omits control
H14 Intuition → + 0.17*** 3.18 0.001 ✔ variables for clarity.
Competition-
based pricing
H15 Intuition → – 0.14*** 2.44 0.007 ↪
these findings contribute to a richer picture of bounded rational de­
Value-based cisions by managers (see also Foss, 2003).
pricing Finally, we provide tentative insights into mediation effects. How­
H16 Cost-based + 0.17** 2.24 0.013 ✔ ever, it is vital to highlight that these implications must be preliminarily
pricing → New
considered due to the post-hoc nature of this analysis. Both cost-based
product
performance and value-based pricing partially mediate the positive effect of confor­
H17 Competition- – 0.03 0.34 0.37 mity on new product performance. This suggests that more conforming
based pricing managers can make more accurate product performance forecasts and
→ New
that this ability can be partially attributed to their engagement in cost-
product
performance
based and value-based pricing. Similarly, both cost-based and value-
H18 Value-based + 0.21*** 2.56 0.005 ✔ based pricing partially mediate the positive effect of intuition on new
pricing → New product performance. A plausible explanation is that both pricing
product practices help to integrate the information managers’ instincts and
performance
feelings provide to them (e.g., about costs and customers) into a more
R2/Q2 for 0.19/
Cost-based 0.09 precise product performance estimate. Again, this seems to be in line
pricing with prior research suggesting intuition may be helpful in pricing (Liozu
R2/Q2 for 0.19/ & Hinterhuber, 2013a). The results also indicate an indirect only
Competition- 0.10 mediation of ambiguity aversion on new product performance via cost-
based pricing
based pricing and zero-sum beliefs on new product performance via
value-based pricing. These results suggest that ambiguity aversion and
zero-sum beliefs, combined with particular pricing practices, may also

238
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play a role in explaining new product performance.
6.1. Theoretical implications
The present study makes three broad theoretical contributions to the
pricing literature. First, this is the first quantitative study investigating
the relationship between psychological traits of individual managers,
pricing practices, and new product performance. Hence, we built
directly on prior conceptual research on the behavioral and psycho­
logical aspects of pricing (e.g., Hinterhuber, 2015; Kienzler, 2018) and
empirical research on companies’ pricing practices (e.g., Ingenbleek
et al., 2003). In so doing, we advance the current state of the pricing
literature by linking both research streams and demonstrating that this
link helps advance marketing theory.
Second, our study indicates that the psychological traits of managers
are clearly related to new product pricing practices, which in turn have a
direct effect on new product performance. Pricing psychology is
generally well accepted in consumer markets. Yet, it has only recently
received increased attention in research on business markets; so far,
primarily in conceptual work (e.g., Hinterhuber, 2015; Iyer et al., 2015;
Kienzler, 2018). Thus, our study highlights the value in exploring the
minds of bounded rational managers to better understand the behavioral
and psychological aspects of pricing in business markets.
Third, the literature on behavioral and psychological aspects of
pricing has diverse theoretical foundations (for instance, see Estelami &
Nejad, 2017; Kienzler, 2017; Töytäri et al., 2017; Woodside, 2015).
However, an overall theoretical framework that guides this emerging
stream of research is currently missing. We illustrate that bounded ra­
tionality can function as such a theoretical framework and guide further
investigations into managerial pricing decisions. In particular, bounded
rationality is suitable because it allows integrating research on diverse
behavioral and psychological aspects, such as individual differences,
heuristics, and biases, under one common framework. In turn, this
receptiveness allows for “thicker” descriptions of bounded rationality
(see Foss, 2003). Moreover, bounded rationality lends itself naturally to
function as such a framework as prior research on behavioral and psy­
chological aspects of pricing has already used it (e.g., Hallberg, 2017;
Iyer et al., 2015; Kienzler, 2018).
6.2. Managerial implications
The findings have implications for managers directly or indirectly
involved in new product pricing decisions. Generally, our study high­
lights the need to manage the influence individuals have on pricing
decisions. More specifically, the study has the following managerial
implications.
First, our study shows that psychological traits can affect new
product performance via three pricing practices. The traits associated
with pricing practices that have a positive relationship with new product
performance are conformity and intuition. Hence, our findings highlight
that new product performance is also a function of the psychological
traits of managers with pricing responsibility. Senior executives inter­
ested in increasing new product sales could include intuition and con­
formity in a list of criteria and competencies for selecting and
developing marketing, sales, or pricing managers with new product
pricing responsibility.
Second, our results highlight the positive and significant relation
between value-based pricing and new product performance. This finding
indicates that investing in value-based pricing is a profitable decision.
While we also find a positive and significant relation between cost-based
pricing and new product performance, a sole focus on cost-based pricing
is not recommended because it neglects market information (e.g., cus­
tomers’ willingness-to-pay). Moreover, we find no relation between
competition-based pricing and new product performance. While this
finding can seem surprising, it is in line with the extended literature on
pricing, highlighting that competition-based pricing often offers only
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Journal of Business Research 133 (2021) 231–241
limited information for profitable pricing. Considering information
related to competitors’ prices does not help managers forecast how well
new products will actually do because customer perception is not in
focus. In other words, competition-based pricing helps managers to
understand what competitors charge for existing products but not to
accurately predict market acceptance of new products. Managers need
to reinforce the point that pricing practices that emphasize competition-
based pricing are problematic since they seem not to contribute to a
company’s goal of reaching its new product performance targets.
6.3. Limitations and suggestions for future research
Like all research, this study has its limitations that offer fruitful av­
enues for future research. First, while we investigate the effects of a
broad set of psychological traits, the present study is clearly not
comprehensive. For instance, prior conceptual work on behavioral and
psychological aspects of pricing has argued that managers employ
simple heuristics in their pricing practices (Hinterhuber, 2015). How­
ever, we are currently missing systematic research that goes beyond
anecdotal evidence. Hence, pricing heuristics make for an intriguing
topic for behavioral pricing research investigating bounded rational
managers. In particular, further research should investigate how simple
heuristics relate to new product performance. A similar argument can be
made for other behavioral and psychological aspects (for examples of
these aspects, see Hinterhuber, 2015; Iyer et al., 2015; Kienzler, 2018).
Second, our findings highlight that it is challenging to accurately
predict managers’ emphasis on value-based pricing from their psycho­
logical traits. We surmise that challenges related to cost-based and
competition-based pricing are general, while those related to value-
based pricing may be specific to a particular pricing situation. We
measure managers’ general psychological disposition (e.g., their general
perceived lack of control in business situations) instead of their
perceived lack of control during a particular pricing decision. Hence,
further research should investigate psychological states instead of traits.
Again, this seems to be particularly important for investigating man­
agers’ relative emphasis on value-based pricing.
Third, we employ a comparatively large and diverse sample of
American managers involved in pricing decisions. Despite this advan­
tage, our sample does not allow us to draw conclusions about managers
in the rest of the world. Future research should investigate our hy­
potheses with a sample from another country. For instance, perceived
lack of control may have a different relationship with pricing practices
due to a more or less competitive business culture.
Fourth, while companies need to consider how individual managers
influence the pricing process, pricing is not always the responsibility of a
single person. Indeed, pricing decisions are to an increasing extent made
by pricing teams (e.g., Feurer, Schuhmacher, & Kuester, 2019). Thus, a
potentially fruitful direction for further research is to investigate how
behavioral and psychological aspects of pricing teams impact pricing
decisions.
Fifth and finally, we are convinced that original studies are impor­
tant to develop a field further. However, single studies do not offer
robust evidence about whether an effect replicates across different
samples, time frames, and operationalizations of measures. Thus, we
encourage other scholars interested in behavioral and psychological
aspects of pricing to conceptually replicate and extend our findings.
Declaration of Competing Interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Acknowledgements
We want to thank the Editors, Prof. Kunal Swani, Ph.D, Prof.
A. Hinterhuber et al. Journal of Business Research 133 (2021) 231–241

Domingo Ribeiro-Soriano and the two anonymous referees for their Hinterhuber, A. (2015). Violations of rational choice principles in pricing decisions.
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