National culture and inter-tier price competition

Abstract

Purpose

This research aims to examine the role of national culture dimensions in the nature of tier competition between high-tier brands and low-tier brands.

Design/methodology/approach

It starts with a conceptual framework based on prospect theory to explain the asymmetric inter-tier competition. It then describes how the national culture dimensions influence the implications of prospect theory and as a result, the nature of inter-tier competition. The paper uses Hofstede's framework to operationalize national culture and derives a number of research propositions that explicate the role of national culture in inter-tier price competition.

Findings

The study finds that the extent of asymmetry favouring high-tier brands over low-tier brands depends on the national culture dimensions. Whereas high levels of individualism, power distance, uncertainty avoidance, and masculinity increase the asymmetry favouring high-tier brands, higher long-term orientation decreases asymmetric price competition favouring high-tier brands.

Practical implications

The findings offer important guidelines for understanding the nature of inter-tier price competition as a function of national culture.

Originality/value

This is the first study to extend inter-tier price competition in the global setting and also the first study that links national culture with prospect theory to examine the boundary conditions of inter-tier price competition.

Citation

Sivakumar, K. (2014), "National culture and inter-tier price competition", Journal of Product & Brand Management, Vol. 23 No. 2, pp. 131-138. https://doi.org/10.1108/JPBM-08-2013-0374