The Effects of Internal and External Reference Prices on Travelers’ Price Evaluations

Document Type

Article

Publication Date

10-30-2017

Publication Title

Journal of Travel Research

Publisher

Sage

Volume

57

Issue

8

First page number:

1068

Last page number:

1077

Abstract

The relative use of an internal reference price (IRP) versus an external reference price (ERP) becomes an important issue in the travel and lodging contexts as the increased promotional activity by destinations and hotels is likely to be based on price-comparison advertisements. However, there is little guidance on how tourism and hospitality organizations can use pricing structure to influence reference price, which is cardinal to travelers’ evaluation of price acceptability. Thus, the current research examines how pricing characteristics of the lodging services shift travelers’ sensitivity to two different types of reference prices, and therefore, influence their price evaluations. Compared with IRP, our findings indicate that individuals are more sensitive to and affected by ERP. The results also demonstrate that information accessibility and perceived diagnosticity are key mechanisms that lead to the differential effect of IRP versus ERP on travelers’ price evaluations. Relevant managerial implications are drawn regarding price and promotion strategies. © 2017, The Author(s) 2017.

Keywords

Reference price; Price evaluation; Information accessibility; Perceived diagnosticity

Disciplines

Hospitality Administration and Management

Language

english

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