Consumers' Perceived Price Fairness and Unfairness Toward Price Increases During Hedonic vs. Utilitarian Situations

Eunjoo Kang, Purdue University

Abstract

This dissertation consists of three essays on the topic of consumers’ response to hotel room rates increases due to external events (hedonic and utilitarian situations). External events such as sporting games, local festivals, or weather-related events (e.g., floods, snowstorms) frame consumers’ motivation to stay in a hotel room (hedonic vs. utilitarian motivations), increasing hotel room demand and resulting in higher room rates. The dynamic changes of hotel room rates during the high demand periods may cause consumers to perceive high room rates as unfair, restricting their intentions or enhancing their desires to book a hotel room before room rates increase even higher. Thus, it is vital to understand the impact of external event characteristics as well as the level of involvement on consumers’ responses to hotel room rate increases. These three papers examine the contextual impact of external events and individual level of involvement on the relationship among price increases, consumers’ perceived fairness and unfairness and their booking intentions. The first paper measures perceived price fairness and perceived price unfairness as separate constructs using the two-step measurement: 1) a binary scale to identify the direction (fair or unfair), and 2) an ordinal scale to capture the magnitude of perceived fairness/unfairness separately. It then examines the effect of consumers’ trip motivation (hedonic vs. utilitarian) on their perceived price fairness/unfairness and their booking intentions in dynamic hotel room pricing. The results demonstrate that the magnitude of price increases and trip motivations (hedonic vs utilitarian motivation) influence the level of perceived unfairness, but not perceived fairness. The findings also empirically verify the concept of separability of perceived fairness and unfairness, calling into question whether a continuum scale of perceived fairness-unfairness (very unfair – very fair) is appropriate to use in measuring perceived price fairness. The second study proposes bivariate measurements of perceived fairness and unfairness to verify the conceptual and empirical independence of perceived fairness and perceived unfairness. The results reveal that consumers can have ambivalent perceptions of fairness and unfairness, and may not necessarily see something as either fair or unfair. Unlike the results of the first study, these results reveal that the magnitude of price increases and external situation (hedonic vs. utilitarian situations) influence both perceived fairness and unfairness. However, the results indicate fairness perceptions are the more powerful drivers of booking intentions than unfair perceptions. The third study examines the moderating role consumer involvement plays in the relationship among price increases, perceived fairness and unfairness, and hotel booking intentions. The results show that low-involved consumers are more sensitive to price changes in perceptions of price fairness and their fairness perceptions have a stronger effect on booking intentions than high-involved ones. For high-involvement consumers, the relationship between unfairness perceptions and booking intentions is stronger than it is for low-involved consumers. The findings show that the moderating effect of involvement is significant only in the utilitarian situation. The three studies highlight the distinction between consumers’ perceived price fairness and perceived unfairness. Consumers may have both fair and unfair perceptions at the same time. The results show that consumers’ perceived fairness is the more powerful driver in booking intentions. If consumers have somewhat ambivalent perceptions, fairness perceptions influence booking intentions. Therefore, hotel management might consider promoting perceived fairness rather than ignoring perceived unfairness because it exerts a more powerful influencer on booking intentions.

Degree

Ph.D.

Advisors

Sydnor, Purdue University.

Subject Area

Marketing|Management

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