Pricing 343
Thus, the field of pricing is characterized
by a paradox. On the one hand, ‘price theory is
one of the most highly developed fields in
economics and marketing science’ (Simon,
1989, p. ix). On the other, ‘there is hardly
another business subject area that has had so
little reverberation in practice as has price
theory’ (Diller, 1991, p. 17). Several reasons
seem to underlie this paradox.
First, a lot of academic work on pricing has
been focusing on pricing modelsof various sorts
(for relevant reviews, see Monroe and Della
Bitta, 1978; Monroe and Mazudmar, 1988;
Nagle, 1984; Rao, 1984, 1993). While these
models are characterized by a high degree of
rigour and enable the derivation of ‘optimal’
prices, pricing strategies, discount structures,
etc., they ‘do not provide operationalrules for
management to follow’ (Monroe and Della
Bitta, 1978, p. 426, emphasis added). Moreover,
such models are typically very ‘heavy’ mathe-
matically and thus not particularly appetizing
for most business executives. Last – but cer-
tainly not least – a lot of price modelling has
been concerned with ‘mathematical elegance,
often at the expense of realism’ (Diamantopou-
los and Mathews, 1995, p. 18) and has ignored
the fact that ‘pricing in reality follows a much
more complex pattern which does not lend
itself so readily to mathematical generalization
and diagrammatical simplification’ (Lieber-
mann, 1969, p. 20). Taken together, these short-
comings go a long way towards explaining ‘the
minimal contributions of models in the pricing
area’ (Jeuland and Dolan, 1982, p. 1). This is
disappointing, not least because ‘if there is any
element in the marketing mix that would seem
amenable to rational decision making, it is
pricing’ (Urbany, 2000, p. 3).
Second, the priorities of managers and the
research interests of academics in the pricing
field have not always (or even mostly) coin-
cided. As Bonoma et al. (1988, p. 359) observe:
‘it is not that academics cannot solve manage-
rial pricing problems or that they have no
interest in solving them. Rather, it seems that
academic researchers have not known, or do
not focus on, the key pricing concerns of
managers in order to conduct rigorous pricing
research.’ To the extent that the issues deemed
important by managers have not been ade-
quately addressed by researchers, it is not
surprising that ‘pricing theory and pricing
research have won little recognition in practice’
(Simon, 1982, p. 23). On the positive side, the
gap may be closing, as indicated by the
increasingly managerial orientation of several
pricing texts published in the past few years
(e.g. Montgomery, 1988; Seymour, 1989; Morris
and Morris, 1990; Monroe, 1990; Nagle and
Holden, 1995; Dolan and Simon, 1996).
Third, pricing has always been a ‘difficult’
area to study empirically, not least because of
confidentiality reasons. As Bain (1949, p. 149)
observed half a century ago, ‘the reluctance of
businessmen to confide to economists their
methods of price calculation and the character
of their associations with rival firms... has
been a serious barrier to close investigation of
price policy as seen by the price maker’. In this
context, the participation rates of firms in
empirical pricing surveys have often been
disappointing (Diamantopoulos, 1991), lending
credibility to the view that ‘it has not been the
tradition of management to be “friendly” to the
needs of academic researchers in the area of
pricing’ (Monroe and Mazudmar, 1988, p. 387).
While the adoption of process-oriented meth-
odologies which rely on close co-operation with
managers (e.g. Howard and Morgenroth, 1968;
Caponet al., 1975; Farley et al., 1980; Bonoma et
al., 1988; Woodside, 1992; Diamantopoulos and
Mathews, 1995) may overcome the shortcom-
ings of survey-based approaches, gaining initial
access to firms is likely to remain a key obstacle
in the empirical study of pricing practices.
Fourth, in the past, many of the recom-
mendations arising from academic research on
pricing have been difficult to implement by
firms because of information processing capa-
bility limitations. It is all very nice to suggest
that comprehensive price analyses should be
undertaken involving estimation of price
response functions, assessment of competitive