Uncertainty perception in bidding for Product-Service Systems under competition

• Published in: Journal of purchasing and supply management Vol. 24; no. 1; pp. 31 - 40
• Main Authors: Kreye, Melanie E., Goh, Yee Mey, Newnes, Linda B.
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.01.2018
• Subjects: Competitive bidding; Decision making; Information; Product-Service Systems; Service contracts; Uncertainty; Service contracts; Uncertainty; Product-Service Systems; Competitive bidding; Information; Decision making
• ISSN: 1478-4092; 1873-6505
• DOI: 10.1016/j.pursup.2017.10.003

This research investigates what impact of uncertainty perception arising from the existence of competition has on the pricing decision for Product-Service Systems (PSS) under uncertainty. PSS provision is an increasingly important area for many businesses and competition increases cognitive pressures on providers even further. We present an experimental study with industrial costing and bidding experts from the defence and aerospace sector. The study consisted of an experimental set-up via two questionnaires which differed in the existence of competition in the bidding scenario. The findings showed that bidding decision makers changed their evaluation of the cost estimate due to the introduction of competition but kept their evaluations of the profit margin and price bids constant. Furthermore, the participants listed the relevant sources of uncertainty that influenced their decision-making process. This research contributes to the literature in two ways. First, our findings showed that predictions from current theory regarding decision-making of cost estimation and pricing are not confirmed when competitively bidding for PSS. Second, we show uncertainty sources that influenced the decision makers and identified p the importance of internal processes of the PSS provider and environmental uncertainty. •This paper investigates the influence of competition on the pricing decision.•An experiment with industrialists is introduced.•The findings show that 67.9% of participants change their bidding strategy through the introduction of competition.•The direction of this change is not universal.•Participants raised and lowered their price bid after the introduction of competition.