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Competitive price-cutting momentum and pricing reactions

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Abstract

In light of the increasing interest in understanding the behavioral side of competitive decision making, this paper examines how the “price-cutting momentum” (PCM) created by other competiors' reactions to an initiator's price cut influences pricing decisions. We explore the PCM construct and present the results of a study examining the effect of PCM on the price recommendations of retail grocery pricing executives. We find that PCM influences pricing reactions inboth low-search and high-search markets. Competing explanations of the results are considered.

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The authors acknowledge the financial support of the Department of Sponsored Programs and Research at the University of South Carolina and the Crane Professorship at the Ohio State University.

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Urbany, J.E., Dickson, P.R. Competitive price-cutting momentum and pricing reactions. Market Lett 2, 393–402 (1991). https://doi.org/10.1007/BF00664225

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