New Frontiers in Competitive Decision Making: Toward a Research Agenda

Alan J. Malter, 1997 [97-124]

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This report summarizes the proceedings of the second Conference on Competitive Decision Making, held June 6-8, 1997, in Charleston, South Carolina. Sponsored by the Marketing Science Institute, University of Notre Dame, and University of Wisconsin-Madison, and organized by Joel E. Urbany, University of Notre Dame, the conference sought to rethink strategy and competitive decision making in light of the increasingly complex and dynamic nature of competition. A central theme was the belief that markets are continuously changing, nonlinear, positive feedback systems characterized by path dependencies, or market regularities. As such, markets rarely converge toward a stable equilibrium point, contrary to assumptions in neoclassical economics.

Given the challenges faced by decision makers in dynamic environments, conference sessions focused on four important issues regarding competitive decision making:

the evolution (past and future) of dynamic market systems, studied with both simulation modeling and historical data analysis;
the question of whether managers actually conjecture about future actions and responses in competitive markets, and if so, how;
the problem of judgmental errors biasing managerial decision making, using both game theory and behavioral decision theory approaches;
the role of decision support systems in reducing or eliminating judgmental error in dynamic competitive decision making, e.g., by modeling optimal promotion strategies.

What are the implications for research on competitive decision making if one adopts this market dynamics orientation? What types of research questions will be important? The presentations at the Charleston conference suggest that crucial to competitive decision making is the higher-order skill of being able to think in terms of complex dynamic systems and to conjecture about future interactions with competitors and customers. For example, Day concludes that the key to surviving industry shakeouts is "informed anticipation," Dickson emphasizes the importance of "process thinking" skills and "prospective memory" (i.e., forward planning skills) in the new "delta-paradigm" of continuous change, and Little discusses managerial "early warning systems" that would be enhanced by automated decision support systems.

While these abilities are clearly essential to effective market learning and strategic planning, our understanding of the basic psychological mechanisms and processes involved in such cognitive performance is still extremely limited. The Charleston presenters made a promising start toward closing this gap, proposing a number of new frameworks and tools to help managers widen their field of vision and succeed (i.e., survive) in an increasingly intense competitive environment. The conference themes also provide a research agenda that can help guide future study of competitive decision making in dynamic markets.

The thirteen presentations summarized in the report are listed below.

Session I-Market Dynamics

Path Dependencies and the Long-term Effects of Routinized Marketing Decisions
Paul W. Farris, University of Virginia
Willem J. Verbeke, Erasmus University (Rotterdam)
Peter R. Dickson, University of Wisconsin-Madison
Patterns and Processes of Industry Consolidation
George S. Day, University of Pennsylvania
Empirical Insights from the Shakeout in Pharmaceutical Wholesaling
Adam J. Fein, University of Pennsylvania / Pembroke Consulting

Session II-Competitive Reactions and Conjecture

Managerial Identification of Competitors
Bruce H. Clark, University of California, Los Angeles
David B. Montgomery, Stanford University
Competitive Reactions and Conjecture: Four Observations, Many Questions
Joel E. Urbany, University of Notre Dame
David B. Montgomery, Stanford University

Session III-Judgmental Error

Reasons for Risk-Averse Decisions and for Individual Differences in Risk Aversion
Elke U. Weber, Ohio State University
Culture and Other Noneconomic Factors in Strategic Decision Making
Nancy R. Buchan, University of Pennsylvania / University of Wisconsin-Madison
Eric J. Johnson, University of Pennsylvania
Rachel T. A. Croson, University of Pennsylvania
Framework for Examining Consumer Choice and Problem Solving
Ravi Dhar, Yale University
Mental Models in Competitive Decision Making: A Blessing and a Curse
Joel H. Steckel, New York University
Judgmental Error in Managerial Decision Making
Robert J. Meyer, University of Pennsylvania

Session IV-Decision Support Systems(DSS)

Marketing Decision Support Systems: Toward Incorporating Competitive Dynamics
Donald R. Lehmann, Columbia University
Randolph E. Bucklin, University of California, Los Angeles
Planning a Manufacturer's Sales Promotion Calendar
Jorge M. Silva-Risso, University of California, Los Angeles / J. D. Power
Randolph E. Bucklin, University of California, Los Angeles
What Would Be DSS Utopia?
John D.C. Little, Massachusetts Institute of Technology