When making travel decisions, consumers are frequently exposed to a multitude of options, including differing price levels for the same product or service across a range of online travel agencies. The current research investigates how the magnitude of price dispersion in online pricing can influence travelers’ product evaluations and purchase intentions. Specifically, we predict that travelers will prefer a hotel with no price dispersion to a hotel with different prices listed when the price difference is small, or narrow. However, when the price difference is more pronounced, or wide, travelers will prefer a hotel with price differences compared to a hotel with no price dispersion. Four experiments demonstrate that this effect is consistent across different contexts and categories. Additionally, based on life history theory, we argue that the relative preference for the same versus different price dispersion will be moderated by the travelers’ childhood socioeconomic status (SES).
AbrateG.FraquelliG.VigliaG.2012. “Dynamic Pricing Strategies: Evidence from European Hotels.” International Journal of Hospitality Management31 (1): 160–68.
2.
AbrateG.NicolauJ. L.VigliaG.2019. “The Impact of Price Variability on Revenue Maximization.” Tourism Management74:224–33.
3.
AbrateG.VigliaG.2016. “Strategic and Tactical Price Decisions in Hotel Revenue Management.” Tourism Management55:123–32.
4.
AinscoughT. L.2005. “The Effect of Brand, Agent and Price on Consumer Evaluation of Travel Services.” Journal of Travel & Tourism Marketing19 (1): 39–48.
5.
AmirD.JordanM. R.RandD. G.2018. “An Uncertainty Management Perspective on Long-Run Impacts of Adversity: The Influence of Childhood Socioeconomic Status on Risk, Time, and Social Preferences.”Journal of Experimental Social Psychology, 79: 217–26.
6.
AncaraniF.ShankarV.2004. “Price Levels and Price Dispersion within and across Multiple Retailer Types: Further Evidence and Extension.” Journal of the Academy of Marketing Science32 (2): 176–87.
7.
AndersonC. K.XieX.2016. “Dynamic Pricing in Hospitality: Overview and Opportunities.” International Journal of Revenue Management9 (2/3): 165–74.
8.
AramanV. F.CaldenteyR.2009. “Dynamic Pricing for Nonperishable Products with Demand Learning.” Operations Research57 (5): 1169–88.
9.
AvivY.PazgalA.2008. “Optimal Pricing of Seasonal Products in the Presence of Forward-Looking Consumers.” Manufacturing & Service Operations Management10 (3): 339–59.
10.
AvivY.WeiM.ZhangF.2019. “Responsive Pricing of Fashion Products: The Effects of Demand Learning and Strategic Consumer Behavior.” Management Science65 (7): 2982–3000.
11.
BaileyJ. P.1998. “Internet Price Discrimination, Self-Regulation, Public Policy and Global Electronic Commerce.” Technical report. The Robert H. Smith School of Business, University of Maryland, College Park, MD.
BayeM. R.MorganJ.ScholtenP.2004. “Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site.” Journal of Industrial Economics52 (4): 463–96.
14.
BaylisK.PerloffJ. M.2002. “Price Dispersion on the Internet: Good Firms and Bad Firms.” Review of Industrial Organization21 (3): 305–24.
15.
BilotkachV.GaggeroA. A.PigaC. A.2015. “Airline Pricing under Different Market Conditions: Evidence from European Low-Cost Carriers.” Tourism Management47:152–63.
16.
BiswasD.2004. “Economics of Information in the Web Economy: Towards a New Theory?” Journal of Business Research57 (7): 724–33.
17.
BiswasA.BlairE. A.1991. “Contextual Effects of Reference Prices in Retail Advertisements.”Journal of Marketing55 (3): 1–12.
18.
BiswasD.BurmanB.2009. “The Effects of Product Digitalization and Price Dispersion on Search Intentions in Offline versus Online Settings: The Mediating Effects of Perceived Risks.” Journal of Product & Brand Management18 (7): 477–86.
19.
BornemannT.HomburgC.2011. “Psychological Distance and the Dual Role of Price.” Journal of Consumer Research38 (3): 490–504.
20.
BrownJ. R.GoolsbeeA.2002. “Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry.” Journal of Political Economy110 (3): 481–507.
21.
CachonG. P.SwinneyR.2011. “The Value of Fast Fashion: Quick Response, Enhanced Design, and Strategic Consumer Behavior.” Management Science57 (4): 778–95.
22.
CareyR. M.MarkusH. R.2016. “Social Class Matters: A Rejoinder.” Journal of Consumer Psychology26 (4): 599–602.
23.
CarlsonJ. P.BeardenW. O.HardestyD. M.2007. “Influences on What Consumers Know and What They Think They Know Regarding Marketer Pricing Tactics.” Psychology and Marketing24 (2): 117–42.
24.
CaroF.GallienJ.2012. “Clearance Pricing Optimization for a Fast Fashion Retailer.” Operations Research60 (6): 1404–22.
25.
CesarioJ.HigginsE. T.ScholerA. A.2008. “Regulatory Fit and Persuasion: Basic Principles and Remaining Questions.” Social and Personality Psychology Compass2 (1): 444–63.
26.
ChangS.ChangC.SuW.2015. “Quality or Sacrifice? The Influence of Decision Task and Product Characteristics on the Dual Role of Price.” Psychological Reports: Employment Psychology & Marketing117 (1): 72–88.
27.
ChenE. Y. I.BeiL.2005. “The Effects of Price Dispersion and Suggested List Price on Consumers’ Internal Reference Price.” Consumer Interests Annual51:160–70.
28.
ChenP.HittL. M.2003. “Understanding Price Dispersion in Internet-Enabled Markets.” Working Paper, Carnegie Mellon University, Pittsburgh, PA
29.
ChenY.CuiT. H.2013. “The Benefit of Uniform Price for Branded Variants.” Marketing Science32 (1): 36–50.
30.
ChoiS.MattilaA. S.2005. “Impact of Information on Customer Fairness Perceptions of Hotel Revenue Management.” Cornell Hotel and Restaurant Administration Quarterly46 (4): 444–51.
31.
ChristodoulidouN.BrewerP.FeinsteinA. H.BaiB.2007. “Electronic Channels of Distribution: Challenges and Solutions for Hotel Operators.” Hospitality Review25 (2): 92–100.
32.
ChuaB.LeeS.GohB.HanH.2015. “Impacts of Cruise Service Quality and Price on Vacationers’ Cruise Experience: Moderating Role of Price Sensitivity.” International Journal of Hospitality Management44:131–45.
33.
ClayK.KrishnanR.WolffE.FernandesD.2002. “Retail Strategies on the Web: Price and Non–Price Competition in the Online Book Industry.” Journal of Industrial Economics50 (3): 351–67.
34.
ClemonsE. K.HannI.HittL. M.2002. “Price Dispersion and Differentiation in Online Travel: An Empirical Investigation.” Management Science48 (4): 534–49.
35.
CrouchG. I.2013. “Homo Sapiens on Vacation: What Can We Learn from Darwin?” Journal of Travel Research52 (5): 575–90.
36.
CuiY.ErrmannA.KimJ.SeoY.XuY.ZhaoF.2020. “Moral Effects of Physical Cleansing and Pro-environmental Hotel Choices.” Journal of Travel Research59 (6): 1105–18.
37.
CuiY. G.KimS.KimJ.2020. “Impact of Preciseness of Price Presentation on the Magnitude of Compromise and Decoy Effects.” Journal of Business Research. Published online October 22. doi.org/10.1016/j.jbusres.2020.10.017.
38.
DellarocasC.ZhangX.AwadN.2007. “Exploring the Value of Online Product Reviews in Forecasting Sales: The Case of Motion Pictures.” Journal of Interactive Marketing21 (4): 23–45.
39.
DemirciftciT.CobanogluC.BeldonaS.CummingsP. R.2010. “Room Rate Parity Analysis across Different Hotel Distribution Channels in the US.” Journal of Hospitality Marketing & Management19 (4): 295–308.
40.
DholakiaU.2017. How to Price Effectively—A Guide for Managers & Entrepreneurs. ISBN 978-0-9991867-1-8.
41.
EllisB. J.FigueredoA. J.BrumbachB. H.SchlomerG. L.2009. “Fundamental Dimensions of Environmental Risk.” Human Nature20 (2): 204–68.
42.
EricksonG. M.JohanssonJ. K.1985. “The Role of Price in Multi-attribute Product Evaluation.” Journal of Consumer Research12 (2): 195–99.
43.
FerreiraK. J.LeeB. H. A.Simchi-LeviD.2016. “Analytics for an Online Retailer: Demand Forecasting and Price Optimization.” Manufacturing & Service Operations Management18 (1): 69–88.
44.
FisherM.GallinoS.LiJ.2018. “Competition-Based Dynamic Pricing in Online Retailing: A Methodology Validated with Field Experiments.” Management Science64 (6): 2496–14.
45.
FosfuriA.GiarratanaM. S.RocaE.2015. “Walking a Slippery Line: Investments in Social Values and Product Longevity.” Strategic Management Journal36 (11): 1750–60.
46.
FrankenhuisW. E.de WeerthC.2013. “Does Early-Life Exposure to Stress Shape or Impair Cognition?” Current Directions in Psychological Science22 (5): 407–12.
47.
FrederickS.LeeL.BaskinE.2014. “The Limits of Attraction.” Journal of Marketing Research51 (4): 487–507.
48.
GallegoD. G.Van RyzinG.1994. “Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons.” Management Science40 (8): 999–1020.
49.
GriskeviciusV.DeltonA. W.RobertsonT. E.TyburJ. M.2011. “Environmental Contingency in Life History Strategies: The Influence of Mortality and Socioeconomic Status on Reproductive Timing.”Journal of Personality and Social Psychology100: 241–54.
50.
GriskeviciusV.AckermanJ. M.CantúS. M.DeltonA. W.RobertsonT. E.SimpsonJ. A.ThompsonM. E.TyburJ. M.2013. “When the Economy Falters, Do People Spend or Save? Responses to Resource Scarcity Depend on Childhood Environments.” Psychological Science24 (2): 197–205.
51.
HaushoferJ.FehrE.2014. “On the Psychology of Poverty.”Science344 (6186): 862–67.
52.
HawsK. L.BeardenW. O.2006. “Dynamic Pricing and Consumer Fairness Perceptions.” Journal of Consumer Research33 (3): 304–11.
53.
HayesA. F.2017. Introduction to Mediation, Moderation, and Conditional Process Analysis: A Regression-Based Approach. New York: Guilford.
54.
HinterhuberA.2015. “Violations of Rational Choice Principles in Pricing Decisions.” Industrial Marketing Management47: 65–74.
55.
HseeC. K.1996. “The Evaluability Hypothesis: An Explanation for Preference Reversals Between Joint and Separate Evaluations of Alternatives.” Organizational Behavior and Human Decision Processes67 (3): 247–57.
56.
HseeC. K.LoewensteinG. F.BlountS.1999. “Preference Reversals between Joint and Separate Evaluations of Options: A Review and Theoretical Analysis.” Psychological Bulletin125 (5): 576–90.
57.
HuangJ.ChangC.ChenC. Y.2005. “Perceived Fairness of Pricing on the Internet.” Journal of Economic Psychology26 (3): 343–61.
58.
HuberJ.PayneJ. W.PutoC.1982. “Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis.” Journal of Consumer Research9 (1): 90–98.
59.
IvanovS.2014. Hotel Revenue Management: From Theory to Practice. Varna, Bulgaria: Zangador.
60.
JeongJ. Y.CromptonJ. L.2018. “Do Subjects from High and Low Context Cultures Attribute Different Meanings to Tourism Services with 9-Ending Prices?” Tourism Management64:110–18.
61.
JiangP.2002. “A Model of Price Search Behavior in Electronic Marketplace.” Internet Research12 (2): 181–90.
62.
KannanP. K.KopalleP. K.2001. “Dynamic Pricing on the Internet: Importance and Implications for Consumer Behavior.” International Journal of Electronic Commerce5 (3): 63–83.
63.
KaplanH. S.GangestadS. W.2005. “Life History Theory and Evolutionary Psychology.” In Handbook of Evolutionary Psychology, edited by BussD. M., 68–95. Hoboken, NJ: Wiley.
64.
KhanU.ZhuM.KalraA.2011. “When Trade-Offs Matter: The Effect of Choice Construal on Context Effects.” Journal of Marketing Research48 (1): 62–71.
65.
KhandeparkarK.MaheshwariB.MotianiM.2020. “Why Should I Pay More? Testing the Impact of Contextual Cues on Perception of Price Unfairness for the Price-Disadvantaged Segment in Dual Pricing.” Tourism Management78:104075.
66.
KimD.JangS. S.2013. “Price Placebo Effect in Hedonic Consumption.” International Journal of Hospitality Management35:306–15.
67.
KimJ.CuiY. G.ChoiC.LeeS. J.MarshallR.2020. “The Influence of Preciseness of Price Information on the Travel Option Choice.” Tourism Management79:104012.
68.
KimJ.FranklinD.PhillipsM.HwangE.2020. “Online Travel Agency Price Presentation: Examining the Influence of Price Dispersion on Travelers’ Hotel Preference.” Journal of Travel Research59 (4): 704–21.
69.
KimJ.KimP. B.KimJ. E.2018. “Different or Similar Choices: The Effect of Decision Framing on Variety Seeking in Travel Bundle Packages.” Journal of Travel Research57 (1): 99–115.
70.
KimJ.KimS.LeeJ. S.KimP.CuiY.2020. “Influence of Choice Architecture on the Preference for a Pro-environmental Hotel.” Journal of Travel Research59 (3): 512–27.
71.
KimJ.LeeJ. C.2020. “Effects of COVID-19 on Preferences for Private Dining Facilities in Restaurants.” Journal of Hospitality and Tourism Management45:67–70.
72.
KimJ.SeoY.2019. “An Evolutionary Perspective on Risk Taking in Tourism.” Journal of Travel Research58 (8): 1235–48.
73.
KimS.KimJ.Badu-BaidenF.GirouxM.ChoiY.2021. “Preference for Robot Service or Human Service in Hotels? Impacts of the COVID-19 Pandemic.” International Journal of Hospitality Management93:102795.
74.
KimW. G.ChoM.KimD.ShinG.2014. “The Effect of Price Dispersion on Hotel Performance.” Tourism Economics20 (6): 1159–79.
75.
KimW. G.McGinleyS.ChoiH. M.LubertoE.LiJ. J.2020. “How Does Room Rate and Rate Dispersion in US Hotels Fluctuate?” Journal of Hospitality and Tourism Management44:227–37.
KockF.2020. “The Behavioral Ecology of Sex Tourism: The Consequences of Skewed Sex Ratios.” Journal of Travel Research. Published online August 11. doi:10.1177/0047287520946106.
78.
KockF.NørfeltA.JosiassenA.AssafA. G.TsionasM. G.2020. “Understanding the COVID-19 Tourist Psyche: The Evolutionary Tourism Paradigm.” Annals of Tourism Research85:103053.
79.
KrachtJ.WangY.2010. “Examining the Tourism Distribution Channel: Evolution and Transformation.” International Journal of Contemporary Hospitality Management22 (5): 736–57.
80.
KrausM. W.PiffP. K.KeltnerD.2009. “Social Class, Sense of Control, and Social Explanation.” Journal of Personality and Social Psychology97 (6): 992–1004.
81.
KrishnaA.BrieschR.LehmannD. R.YuanH.2002. “A Meta-analysis of the Impact of Price Presentation on Perceived Savings.” Journal of Retailing78 (2): 101–18.
82.
LeeJ. C.CuiY.KimJ.SeoY.ChonH.2020. “Photo Taking Paradox: Contrasting Effects of Photo Taking on Travel Satisfaction and Revisit Intention.” Journal of Travel Research. Published online April 7. doi:10.1177/0047287520912334.
83.
LiJ.YangM.PanB.2015. “Network Analysis of Navigation Paths of Tourists’ Trip Planning and Power Structure of the Online Tourism in China.” Asia Pacific Journal of Tourism Research20 (Supp1): 1451–65.
84.
LiuQ.van RyzinG.2008. “Strategic Capacity Rationing to Induce Early Purchases.” Management Science 54 (6): 1115–31.
85.
LockyerT.2005. “The Perceived Importance of Price as One Hotel Selection Dimension.” Tourism Management26 (4): 529–37.
86.
MaserB.WeiermairK.1998. “Travel Decision-Making: From the Vantage Point of Perceived Risk and Information Preferences.” Journal of Travel & Tourism Marketing7 (4): 107–21.
87.
MattilaA. S.O’NeillJ. W.2003. “Relationships between Hotel Room Pricing, Occupancy, and Guest Satisfaction: A Longitudinal Case of a Midscale Hotel in The United States.” Journal of Hospitality and Tourism Research27 (3): 328–41.
88.
MelisG.PigaC. A.2017. “Are All Online Hotel Prices Created Dynamic? An Empirical Assessment.” International Journal of Hospitality Management67:163–73.
89.
MittalC.GriskeviciusV.2014. “Sense of Control Under Uncertainty Depends on People’s Childhood Environment: A Life History Theory Approach.”Journal of Personality and Social Psychology107 (4): 621–37.
90.
MortonF. S.ZettelmeyerF.Silva-RissoJ.2001. “Internet Car Retailing.” Journal of Industrial Economics49 (4): 501–19.
91.
MurrayK. B.1991. “A Test of Service Marketing Theory: Consumer Information Acquisition Activities.” Journal of Marketing55 (1): 10–25.
92.
NicolauJ. L.SharmaA.2019. “To Ban or Not to Ban Rate Parity, That Is the Question. . . or Not?” International Journal of Hospitality Management77:523–27.
93.
NooneB. M.MattilaA. S.2009. “Hotel Revenue Management and the Internet: The Effect of Price Presentation Strategies on Customers’ Willingness to Book.” International Journal of Hospitality Management28 (2): 272–79.
94.
OhH.1999. “Service Quality, Customer Satisfaction, and Customer Value: A Holistic Perspective.” International Journal of Hospitality Management18 (1): 67–82.
95.
PanX.RatchfordB. T.ShankarV.2002. “Can Price Dispersion in Online Markets Be Explained by Differences in E-tailer Service Quality?” Journal of the Academy of Marketing Science30 (4): 433–45.
96.
PapanastasiouYSavvaN.2017. “Dynamic Pricing in the Presence of Social Learning and Strategic Consumers.” Management Science63 (4): 919–39.
97.
ParkJ.KimJ.2005. “The Effects of Decoys on Preference Shifts: The Role of Attractiveness and Providing Justification.” Journal of Consumer Psychology15 (2): 94–107.
98.
ParkJ.KimJ.KimS.2020. “Evolutionary Aspects of Scarcity Information with regard to Travel Options: The Role of Childhood Socioeconomic Status.” Journal of Travel Research. Published online November 19. doi:10.1177/0047287520971040.
SchindlerR. M.2012. Pricing Strategies: A Marketing Approach. Los Angeles, CA: Sage.
101.
SchwarzN.CloreG. L.1983. “Mood, Misattribution, and Judgments of Well-being: Informative and Directive Functions of Affective States.” Journal of Personality and Social Psychology45 (3): 513–23.
102.
ŞenA.2013. “A Comparison of Fixed and Dynamic Pricing Policies in Revenue Management.” Omega41 (3): 586–97.
103.
SenguptaA.WigginsS. N.2014. “Airline Pricing, Price Dispersion, and Ticket Characteristics on and off the Internet.” American Economic Journal: Economic Policy6 (1): 272–307.
104.
SeoY.KoD.KimJ.2021. “It Is All in the Mind (Set)! Matching Mindsets and Luxury Tourism.” Journal of Travel Research60 (1): 184–96.
105.
ShahA. K.MullainathanS.ShafirE.2012. “Some Consequences of Having Too Little.”Science338 (6107): 682–85.
106.
SharmaA.NicolauJ. L.2019. “Hotels to OTAs: “Hands Off My Rates!” The Economic Consequences of the Rate Parity Legislative Actions in Europe and the US.” Tourism Management75:427–34.
107.
SmithM. D.2001. “The Law of One Price? Price Dispersion and Parallel Pricing in Internet Markets.” Working Paper, Carnegie Mellon University, Pittsburgh, PA.
108.
SnibbeA. C.MarkusH. R.2005. “You Can't Always Get What You Want: Educational Attainment, Agency, and Choice.” Journal of Personality and Social Psychology88 (4): 703–20.
109.
SpektorM. S.KellenD.HotalingJ. M.2018. “When the Good Looks Bad: An Experimental Exploration of the Repulsion Effect.” Psychological Science29 (8): 1309–20.
110.
StanglB.InversiniA.ScheggR.2016. “Hotels’ Dependency on Online Intermediaries and Their Chosen Distribution Channel Portfolios: Three Country Insights.” International Journal of Hospitality Management52:87–96.
111.
StearnsS.1992. The Evolution of Life Histories. Oxford: Oxford University Press.
112.
StephensN. M.MarkusH. R.PhillipsL. T.2014. “Social Class Culture Cycles: How Three Gateway Contexts Shape Selves and Fuel Inequality.” Annual Review of Psychology65:611–34.
SweetingA.2012. “Dynamic Pricing Behavior in Perishable Goods Markets: Evidence from Secondary Markets for Major League Baseball Tickets.” Journal of Political Economy120 (6): 1133–72.
115.
ToddP. M.GigerenzerG.2007. “Environments That Make Us Smart: Ecological Rationality.” Current Directions in Psychological Science16 (3): 167–71.
116.
UrbanyJ. E.BeardenW. O.WeilbakerD. C.1988. “The Effect of Plausible and Exaggerated Reference Prices on Consumer Perceptions and Price Search.”Journal of Consumer Research15 (1): 95–110.
117.
VigliaG.MauriA.CarricanoM.2018. “The Exploration of Hotel Reference Prices under Dynamic Pricing Scenarios and Different Forms of Competition.” International Journal of Hospitality Management52:46–55.
118.
VölcknerF.2008. “The Dual Role of Price: Decomposing Consumers’ Reactions to Price.” Journal of the Academy of Marketing Science36 (3): 359–77.
119.
VossG. B.ParasuramanA.GrewalD.1998. “The Roles of Price, Performance, and Expectations in Determining Satisfaction in Service Exchanges.” Journal of Marketing62 (4): 46–61.
120.
WadhwaM.ZhangK.2015. “This Number Just Feels Right: The Impact of Roundedness of Price Numbers on Product Evaluations.” Journal of Consumer Research41 (5): 1172–85.
121.
WangD.NicolauJ. L.2017. “Price Determinants of Sharing Economy Based Accommodation Rental: A Study of Listings from 33 Cities on Airbnb.com.” International Journal of Hospitality Management62:120–31.
122.
WangL.YouY.YangC. M.2020. “Restrained by Resources: The Effect of Scarcity Cues and Childhood Socioeconomic Status (SES) on Consumer Preference for Feasibility.”International Journal of Research in Marketing37 (3): 557–71.
123.
WeatherfordL. R.BodilyS. E.1992. “A Taxonomy and Research Overview of Perishable-Asset Revenue Management: Yield Management, Overbooking, and Pricing.” Operations Research40 (5): 831–84.
124.
WuK.VassilevaJ.NoorianZ.ZhaoY.2015. “How Do You Feel When You See a List of Prices? The Interplay among Price Dispersion, Perceived Risk and Initial Trust in Chinese C2C Market.” Journal of Retailing and Consumer Services25:36–46.
125.
XiaL.MonroeK. B.CoxJ. L.2004. “The Price Is Unfair! A Conceptual Framework of Price Fairness Perceptions.” Journal of Marketing68 (4): 1–15.
126.
YeF.ZhangL.LiY.2018. “Strategic Choice of Sales Channel and Business Model for the Hotel Supply Chain.”Journal of Retailing94 (1): 33–44.
127.
ZeithamlV. A.1981. “How Consumer Evaluation Processes Differ between Goods and Services.” In Marketing of Services, edited by J.DonnellyGeorgeW., 186–90. Chicago: American Marketing Association.
128.
ZhuangH.LeszczycP. T. P.LinY.2018. “Why Is Price Dispersion Higher Online Than Offline? The Impact of Retailer Type and Shopping Risk on Price Dispersion.” Journal of Retailing94 (2): 136–53.
