Consumer Reactions to Drip Pricing: The Moderating Effect of Price Fairness in the Sharing Economy Accommodation

Abstract

With the growth of the sharing economy, consumers are price-shopping for their travel plans. Drip pricing is a concept practiced in specific service industries but is understudied in the sharing economy. This study aims to examine the effect of pricing presentation on consumer’s intention to stay at an accommodation in a sharing economy context. Two studies were conducted. Study 1 tests the research framework and the effect of drip pricing versus partitioned pricing. Study 2 investigates the effect of perceived price fairness. Consistent in all two studies, consumers prefer partitioned pricing over drip pricing in the sharing economy context. Perceived price fairness moderates the hypothesized relationships, suggesting this moderating factor can be used to overcome the provider-imposed pricing presentations and attenuate the negative effect it has on staying intentions. The findings in this study help sharing economy hosts to better understand how to overcome the dictated pricing presentations on the platform. Based on the results, the pricing of the service fee is an important factor to ensure that customers will book their stay. This research advances the investigation of pricing presentation in a sharing economy context. A new moderator perceived fairness was identified as a strong moderator for consumers to stay in a sharing economy.