Journal
INTERNATIONAL JOURNAL OF HOSPITALITY MANAGEMENT
Volume 52, Issue -, Pages 46-55Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.ijhm.2015.09.010
Keywords
Reference price; Dynamic pricing; Hotel pricing; Price competition; Price comparison
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The reference price, used by consumers to evaluate market prices, has tremendous relevance in dynamic pricing. Reconciling current heterogeneous theories and studies on reference prices, this paper analyzes the impact of hotel price sequences on consumers' reference prices through a lab and a field experiment. Experiment 1 tests the importance of retrospective price evaluations, while Experiment 2 evaluates the impact of three forms of competition: (i) simultaneous behavior, where firms adjust prices simultaneously; (ii) leader-follower behavior, where one firm acts as the leader; and (iii) independent behavior, where each player takes its rival's strategy as given and seeks to maximize its own profits. The results show that consumers decrease their reference price when competing hotels adjust their prices simultaneously. Relevant managerial implications are drawn for the hospitality industry, which is affected by the presence of online travel agencies that announce the daily rates offered by each competitor. (C) 2015 Elsevier Ltd. All rights reserved.
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