Competitive Reactions and Conjecture: Issues and Prospects

Competitive Reactions and Conjecture: Issues and Prospects

By Joel E. Urbany, David Bruce Montgomery
1997Working Paper No. 1451

We review recent literature on competitive reactions and strategic thinking and offer several observations. Evidence is mounting that strategic thinking is an unnatural act, made difficult by natural individual biases and organizational roadblocks. In addition, it is possible that uncertainty about competitive behavior is caused by and contributes to informal and incomplete competitive intelligence. We discuss several examples of firms who have overcome these barriers in creative ways and improved their decision-making as a result. In short, it often does pay to attempt to think several periods ahead and force your feet into the shoes of the competitor. Paradoxically, though, another school of thought suggests that firms can overemphasize their competition in strategic decision-making. A number of questions are raised for discussion.