Lorenz Gräf

Preventing Competitive Irrationality -- an Empirical Analysis of Factors and Strategies Influencing Managers' Tendency to Trade off Absolute for Relative Profit Lorenz Gräf

Managers often have an affect-induced tendency to attribute value not only to absolute but also to relative profits when making decisions. They may, for example, price more aggressively that is necessary and thereby forego absolute profits only to `beat' their competitors. This phenomenon has been dubbed `competitive irrationality' and has repeatedly been demonstrated in the extant literature. However, as of yet, there is no research on how to mitigate such tendencies. Embarking from this starting point, this dissertation addresses the question which factors that are under the control of managerial decision makers and which explicit counterstrategies might help attenuate competitive irrationality. Thereto, it integrates extant research from psychology and economic sciences in order to derive specific hypotheses on various factors and debiasing strategies. These hypotheses are then tested using large-sample web-based survey experiments with business students and actual managers. This book is suited both for academics attempting to understand the phenomenon of competitive irrationality and practitioners who wish to shield themselves from it.