Pricing Decision in Small Firms: Theory and Practice

Aims to study the pricing decisions of small firms. Conventional wisdom argues that small firms tend to use relatively unsophisticated methods of pricing; however, indicates that small firms may in fact be a good deal more sophisticated in their techniques of pricing than has previously been supposed. Reviews the theory and empirical evidence to date and notes a significant gap in the research into small business pricing. Using a case study method based on 12 detailed cases of the pricing policies of small companies, concludes that there is little evidence to support the findings of previous studies which indicated the predominance of full‐cost pricing. It was found that small companies avoided “head‐on” competition and sought to exploit their own market niche as a means of exercising more control over their prices.