A double substitution brought Leicester, who made five changes to their starting line-up, back into it as David Nugent pulled one back 13 minutes from time but the Premier League side held on to end Leicester's run of four straight victories.
Pearson kept top scorers Nugent and Lloyd Dyer on the bench until 22 minutes from time, with the pair adding a much-needed goal threat.
Pearson said: "We couldn't have gone out there with a similar side to the one we've been churning out some good results with because you get to a point where players will hit a physical wall - and sometimes a mental wall as well.
"We did okay in patches but probably didn't manage the ball as well as we're capable of.
"You've got to give them credit. When you give the ball away against a Premier League side, you have to work hard to get it back and I think they're probably a better side than people give them credit for.
"We didn't quite play as well as we can do but we still gave a decent account of ourselves. We had our moments but not enough of them."
Pearson, meanwhile, hinted there could be truth in reports linking the club with veteran striker Kevin Phillips, who is a free agent after leaving Crystal Palace.
The Foxes manager said: "The last time I worked with him (at West Brom) he scored a hat-trick so it would be a bit silly not to be partly interested - but we'll see what happens."