The general theory of behavioral pricing: Applying complexity theory toexplicate heterogeneity and achieve high-predictive validity

Abstract

Building behavioral-pricing models-in-contexts enriches one or more goals of science and practice: description, understanding, prediction, and influence/control. The general theory of behavioral strategy includes a set of tenets that describes alternative configurations of decision processes and objectives, contextual features, and beliefs/assessments associating with different outcomes involving specific price-points. This article explicates these tenets and discusses empirical studies which support the general theory. The empirical studies include the use of alternative data collection and analytical tools including true field experiments, think aloud methods,long interviews, ethnographic decision-tree-modeling, and building and testing algorithms (e.g., fuzzy-set qualitative comparative analysis). The general theory of behavioral pricing involves the blending of cognitive science, complexity theory, economics, marketing, psychology, and implemented practices. Consequently, behavioural pricing theory is distinct from context-free microeconomics, market-driven, and competitor-only price-setting. Capturing and reporting contextually-driven alternative routines to price setting by a compelling set of tenets represent what is particularly new and valuable about the general theory. The general theory serves as a usefulfoundation for advances in pricing theory and improving pricing practice.