Is that deal worth my money? The effect of relative and referent thinking on starting price under different promotion programs using hotel coupons in online auctions

Developments in information technology have made shopping at home much easier and have created a so-called Otaku economy that is an increasing focus for tourism and hotel business managers. A related development is the increase in the popularity and value of online auction channels. Scholars thus argue that it is important to examine what factors influence consumers' bidding behavior in this new context. One issue is what initial bidding price and a promotion program must offer to attract customers to join an auction when they will be using a complex online auction mechanism. This study used a 2 x 2 between-subjects design and the principles of relative and referent thinking to examine the influence of the starting price (whether the starting price deviates from the reference price) and the promotion program (price vs. non-price) on consumers' online bidding for hotel coupons. The results of the analysis indicate the following. First, starting price is positively related to end price. Second, the relative thinking effect holds when the actual price is the same as the sellers' reference price (i.e., when the starting price is higher). In this context, consumers prefer price promotion programs, and hence, their willingness to pay through bidding will increase. Finally, the referent thinking effect holds when the actual price deviates from the seller's reference price (i.e., when the starting price is low). In this context, consumers prefer non-price promotion programs, and their willingness to pay through bidding will increase. The academic and managerial implications of this research are discussed in the conclusion. (C) 2011 Elsevier Ltd. All rights reserved.