The subject of pricing objectives has been of interest to managers, cost analysts and accountants for some time. Empirical studies on the topic usually point out discrepancies between the theory underlying pricing decisions and the actual practice of firms. In this paper it is argued that managerial incentive plans may help explain part of this theory/practice divergence. More specifically, the importance of profit related pricing objectives was found to be related to managerial incentive compensation plans.
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Gordon et al. (1986) studied this question.
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