The exploration of hotel reference prices under dynamic pricing scenarios

Giampaolo Viglia, Aurelio Mauri, Manu Carricano

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    Abstract

    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.
    Original languageEnglish
    Pages (from-to)46-55
    Number of pages10
    JournalInternational Journal of Hospitality Management
    Volume52
    Early online date1 Oct 2015
    DOIs
    Publication statusPublished - Jan 2016

    Keywords

    • Reference price
    • Dynamic pricing
    • Hotel pricing
    • Price competition
    • Price comparison

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