In the context of price and quality-related decisions, managers and employees are happy to
take responsibility when actual profits outperform an expected profit, that's largely
attributable to the outperformance to the quality of product/service of the firm.
It's known for managers to link product/service quality to their actions and the employees of
the firm that they belong to. From their perspective, the firm controls creating
products/services and delivering them to consumers. And they do not assume good profits are
down to attractively priced ones. Pricing is seen more as a product of external factors beyond
the manager’s control. As when profit performance is lower than expected, managers are
more likely to blame pricing than poor quality products/services.
Driving this prediction is the basic idea that individuals are more likely to ascribe good
outcomes to forces under one’s control, and bad outcomes to forces outside of one’s control.
Product quality is a defining feature of the firm. A manager’s decision to improve quality is
perceived to reflect the core competence of the organization and engage the identity and
values of its employees. Quality is controllable and stable. For these reasons, attributing
success in the market to the superior quality of one’s product/service enhances the manager’s
perception of the self and the firm.
Price, however, is often equated to market conditions. Pricing is seldom considered a core
competence of the organization, After all, there are many moving parts related to the pricing
process, in particular, the behaviors of external agents such as customers and competitors.
Pricing decisions are characteristically hard to get right. Yet, price is easy to change at short
notice. For these reasons, attributing failure in the market to the aggressive price of a
competitor’s offering sustains the manager’s perception of the self and the firm.
Taking this managerial psychology into account, business owners are responsible for which
increases or decreases firm profitability.
– (London Business School, 2014).

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