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DOI 10.1007/s10660-014-9137-4
Abstract Research on consumer and market behavior related to prices has increased
remarkably in recent years. Researchers have paid special attention to the effects
of price perception in consumer purchasing processes. In this paper a model of
antecedents and consequences of consumer price fairness perception in an online hotel
booking setting is proposed. The results show that consumers use reference prices and
are guided by their familiarity with online hotel bookings in determining price fairness. Moreover, when consumers perceive prices as fair, they show more confidence
in the decisions made and are more satisfied with the price. However, there is no direct
influence on loyalty, although this relationship appears indirectly through satisfaction
with the price and confidence in the decision.
Keywords
1 Introduction
It is important to ascertain the factors that explain how consumers judge and interpret the information and psychophysical stimuli that prices represent insofar as they
have an enormous influence on their decisions and purchasing behavior [20,21]. The
phenomenon underlying consumer interpretation of price fairness, or in other words,
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about accommodation (72.7 %) justify our selection of hotel online bookings for the
empirical application in this paper.
The goal of this research is to analyze consumer behavior in regard to online purchase decisions in order to ascertain what aspects determine consumer PFP, as well
as the possible consequences of consumer price perception in a scenario in which the
pricing strategy is based on demand.
This analysis leads to the establishment of a model with the antecedents and consequences of PFP that is to the best of our knowledge not available in the literature.
We use this model to analyze the direct and indirect relationships between antecedents
and perceived price fairness, as well as between the latter and its consequences. Thus,
Sect. 2 studies the main antecedents and consequences considered in the analyses of
the PFP and establish the main hypotheses tested in this paper. Section 3 describes
the methodology used based on a partial least squared (PLS) analysis. Finally, the last
section details the main conclusions and future avenues for research.
2 Antecedents and consequences of price fairness perception
Three aspects are usually considered when studying PFP: distributive fairness, procedural fairness and interactional fairness. In this paper, we analyze distributive and
procedural fairness. First, we consider antecedents that influence PFP, such as reference price (RP), FOHB and search for fairness (SF). At the same time, we evaluate
the consequences of PFP over DC, loyalty and satisfaction with price (SP) (Fig. 1).
2.1 Reference price and price fairness perception
Most research on perceived price fairness is based on the dual entitlement principle,
which establishes that firms must have a reference profit and consumers a RP [20,21].
Decision
Confidence (DC)
Reference Price
(RP)
Familiarity with
Online Hotel
Bookings (FOHB)
Search of
Fairness (SF)
Price Fairness
Perception (PFP)
Loyalty (L)
Satisfaction with
price (SP)
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In this sense, consumers compare the present price to the RP and the vendor compares
the present profit to the reference profit [8].
Some authors such as [19] consider different scenarios to determine how fair a price
is perceived to be. The results reveal that consumers tend to compare prices observed
on the Internet to prices on the traditional sales channel. That is, they use the prices
fixed on the traditional channel as RPs to evaluate the fairness of Internet prices. When
prices are the same on both channels, prices are perceived as unfair, since consumers
are looking for a lower price on the virtual channel.
Thus, we formulated the following hypothesis regarding the influence of the RP on
consumer PFP:
H1 The reference price will have a positive influence on the price fairness perception.
2.2 Familiarity with online hotel bookings and price fairness perception
The second antecedent in this model is familiarity with online hotel booking (FOHB).
Taking into account that experience is a consequence of learning, [8,16] establish that
the purchase experience, product consumption or product knowledge influence the
PFP.
Beldona and Kwansa [5], Noone and Mattila [35], Rohlfs and Kimes [40], Wirtz
and Kimes [55], Yoonjoung and Lee [56] observed that consumers who were more
familiar with the pricing strategy and bookings online have a fairer perception of
prices set using this strategy. Considering the arguments above we can formulate the
following hypothesis:
H2 Familiarity with online hotel bookings will have a positive effect on the price
fairness perception.
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3 Methodology
The main characteristics of the empirical application are discussed in the following sections. First we provide information about the sample and then the variables used to measure the different latent variables before finally presenting the main research results.
3.1 Participants, procedure and sample
We have designed an original experiment based on a small computer application in
order to obtain information. It simulates and monitors the decision making process
that consumer carries out when they decide to book a hotel (before and after of the
process). This computer application is integrated in an online survey. So, the first
section has questions such as demographics, experience of online hotel reservation,
knowledge of prices and RPs. Then, the user is directed to a computer application
where they book a hotel. They can choose between five different hotels 4-stars that are
based on real hotels, but in the computer application these hotels has untrue names.
We use hotels 4-stars because they are the most requested by travelers according to
Hotel Occupancy Survey.
The participants took the decision to book a hotel room in a simulated environment
of five hotels with different pricing strategies derived from the yield management
strategy used. Respondents were told that they were planning a leisure break with
other person (e.g. friend) and needed to make a hotel reservation for six nights in
a hotel 4-star. Each hotel provides information only the price and the conditions to
get it. After booking the hotel room, users come back to the questionnaire to answer
questions regarding fairness perception and other behavior dimensions.
In relation with the sample characteristics, data were collected using an online selfadministered survey carried out between February 29th, 2012 and March 27th, 2012 to
600 subjects. A final total of 541 questionnaires were deemed valid once incomplete
ones had been ruled out. These subjects were chosen considering quotas based on
the socio-demographic profile of Internet users aged between 16 and 74 years who
sometimes purchase on the Internet.
3.2 Variables measurement
The independent variables are RP, FOHB and SF, and the dependent variables are PFP,
DC, loyalty (L) and SP. The scales used in each variable are explained below.
In the case of PFP, we have used both the scale and the items established in [28], but
have adapted them to our study. The variables that appear in Table 1 show the average
of six items (three for distributive fairness and three for procedural fairness) in five
situations considered to evaluate the fairness perception related with five revenue
management strategies used in hotels. Thus, PFP1 captures the average of distributive
and procedural fairness in the revenue management based on the restrictions accepted,
PFP2 refers to distributive and procedural fairness in the revenue management based
on time, PFP3 includes the items relating to distributive and procedural fairness in the
revenue management based on location; PFP4, which includes items of distributive
and procedural fairness in the revenue management based on the number of nights of
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Description
PFP1
Fair
Reasonable
Acceptable
The pricing process that sets lower
prices for those who cannot change
or cancel their booking, is
Fair
Reasonable
Acceptable
PFP2
Fair
Reasonable
Acceptable
Fair
Reasonable
Acceptable
PFP3
Fair
Reasonable
Acceptable
Fair
Reasonable
Acceptable
PFP4
Fair
Reasonable
Acceptable
Fair
Reasonable
Acceptable
PFP5
Fair
Reasonable
Acceptable
Fair
Reasonable
Acceptable
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Scale
Source
Seven-point Likert
scale (strongly
disagree (1) and
strongly agree
(7))
the stay; and, finally, PFP5, which consists of the distributive and procedural fairness
items in revenue management according to booking in advance.
The RP has been measured by three items adapted from [26] that consider maximum, reasonable and minimum prices given by the consumers to pay for booking one
night in a hotel (Tables 2).
In the case of FOHB, we have considered two items. The first has been adapted from
[7,26], while the second has been proposed in this paper and measures knowledge of
the process of online hotel booking (Table 3).
For SF, we have considered that consumers compare prices by nature [33] and
that these comparisons are basically made to ascertain whether or not an observed
price is fair. Taking into account that different alternatives are used in these comparisons, namely expected price, RP, competitors prices, previous experience, sources of
external information and recommendations, we have opted in this paper to use the
tems shown in Table 4 below to measure this latent variable.
To measure DC, we have used items for the different levels this variable comprises,
namely: acquisition and processing of information; formation of the set to consider
and, finally, personal and social outcomes [3], using a seven-point likert scale [13]
(Table 5).
Although some authors have distinguished three loyalty dimensions, namely word
of mouth, price tolerance and intentions to purchase again, we have focused on word
of mouth and purchase intentions to measure loyalty, as in [45]. More specifically, we
have used the items shown in Table 6.
To measure satisfaction, we have focused on satisfaction with price, using the items
shown in Table 7 adapted from previous studies.
Table 2 RP items
Item
Description
Scale
Source
RP1
Numerical price
RP2
RP3
Description
Scale
Source
FOHB1
FOHB2
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Description
Scale
SF1
I think it is unfair that the price does not match the hotel price that I
expected to find
Seven-point Likert
scale (strongly
disagree (1) and
strongly agree
(7))
SF2
SF3
SF4
SF5
Description
Scale
Source
DC1
DC2
DC3
DC4
DC5
DC6
Description
Scale
Source
L1
Adapted from
[12,31,45,58].
L2
L3
L4
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Description
Scale
Source
SP1
Seven-point Likert
scale (strongly
disagree (1) and
strongly agree
(7))
SP2
SP3
SP4
SP5
SP6
4 Results
Taking into account the characteristics of the information obtained in the survey and
the theoretical model proposed, the model was estimated using PLS. First, we have
developed an exploratory factor analysis, which allows us to decide which items to
use as indicators of each latent variable (factor) shown in Fig. 2.
The PLS estimate was performed using the program SmartPLS 2.0.M3
(www.smartpls.de). Table 8 shows the results regarding reliability and convergent
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Item
Loading
t value
(Bootstrap)
Cronbachs
alpha
Composite
reliability
AVE
RP
RP1
0.8955**
8.5987
0.9153
0.9463
0.8548
RP2
0.9723**
11.8658
RP3
0.9040**
10.1880
FOHB1
0.9640**
96.3480
0.9273
0.9649
0.9322
FOHB 2
0.9671**
116.4281
0.7498
0.8220
0.4885
0.8031
0.8635
0.5597
0.9008
0.9238
0.6698
0.8656
0.9097
0.7178
0.9286
0.9443
0.7396
FOHB
SF
PFP
DC
SP
SF1
0.6066**
3.6870
SF2
0.8233**
6.8234
SF3
0.8552**
6.2869
SF4
0.5392**
3.2368
SF5
0.6121**
4.0977
PFP1
0.7694**
18.4691
PFP2
0.6500**
8.1560
PFP3
0.7388**
14.7018
PFP4
0.8058**
20.5398
PFP5
0.7674**
17.3904
DC1
0.8405**
33.2855
DC2
0.7243**
12.5020
DC3
0.8424**
25.7515
DC4
0.7842**
18.1722
DC5
0.8691**
27.1776
DC6
0.8413**
29.2734
L1
0.9167**
66.2106
L2
0.9078**
56.0615
L3
0.8408**
23.4523
L4
0.7070**
14.5039
SP1
0.8622**
40.9897
SP2
0.9051**
52.8285
SP3
0.8568**
34.8903
SP4
0.9154**
52.1412
SP5
0.7163**
16.0229
SP6
0.8889**
43.1299
validity evaluation. The results for the model show that all items are significant and
their outer loadings are greater than 0.60 [2] and the cross-loads always being greater
for the latent variables upon which the respective items are loaded.
The usual Goodness of Fit (GoF) measure, proposed in [48], is the geometric
mean of the average communality (outer model) and the average R 2 (inner model),
with a value of 0.43. We can accept this value as acceptable according to [54]. As
regards the reliability of the measurement instrument, Cronbachs alpha value for
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DC
FOHB
PFP
RP
SF
0.4885
DC
0.0887
FOHB
0.2108
0.0747
0.9322
PFP
0.0525
0.2130
0.0677
0.5597
0.0708
0.4732
0.0308
0.1141
0.7178
RP
0.0018
0.0507
0.0230
0.0294
0.0453
0.8548
SP
0.0688
0.5793
0.0561
0.1940
0.5550
0.0727
SP
0.6698
0.7396
Note The diagonal (bold values) shows the AVE and below the diagonal correlations between latent variables
Relation
Coefficient
t value (Bootstrap)
p value
H1
RP->PFP
0.139*
1.766
0.039
H2
FOHB->PFP
0.173*
2.090
0.019
H3
SF->PFP
0.144*
1.754
0.040
H4
PFP->DC
0.462**
6.321
0.000
H5
PFP->L
0.035n.s.
0.528
0.299
H6
DC ->L
0.298**
3.459
0.000
H7
PFP->SP
0.440**
6.084
0.000
H8
SP ->L
0.534**
6.832
0.000
all the latent variables is greater than 0.7, the standard criterion given in [36]; the
composite reliability values are also greater than 0.8 in all cases and the convergent
validity scores (AVE) are near to or greater than 0.5, as recommended in [15].
The discriminant validity criterion [15] is also fulfilled, as the AVE is greater than
the square of the estimated correlation between the latent variables (Table 9).
Table 10 shows the results of the hypothesis tests raised in this paper.
The results verify the hypotheses raised for the model, except for the influence
between PFP and loyalty. In relation to the antecedents that influence the PFP, we can
observe a positive and significant relationship with RP ( = 0.139, p < 0.05), FOHB
( = 0.173, p < 0.05) and the SF ( = 0.144, p < 0.05), confirming hypotheses 1, 2,
and 3.
As regards to the consequences that take place as a result of PFP, there is a positive
and significant influence on DC ( = 0.462, p < 0.01), confirming hypothesis 4.
Hypothesis 7 is also confirmed since there is a positive and significant relationship
between PFP and SP ( = 0. 440, p < 0.01). PFP has a negative but non significant
impact on loyalty ( = 0.035, n.s.), therefore rejecting hypothesis 5. However, PFP
indirectly influences loyalty through DC and satisfaction with price, because there is
an overall effect with a coefficient of of 0.338 and a p value lower than 0.01. Finally,
decision confidence ( = 0.298, p < 0.01), as well as satisfaction with price ( = 0.534,
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p < 0.01) are positively and significantly related to loyalty, confirming hypotheses 6
and 8.
5 Conclusions
In recent years, online hotel bookings have increased considerably, although the
antecedents that determine PFP and the consequences that arise as a result of this
perception on the Internet have not been analyzed in depth. Taking this situation into
account, this research contributes to furthering the existing literature on this subject.
After analyzing the results, we can establish that consumers use RPs when assessing
the fairness of the price observed. Furthermore, when consumers are more familiar
with online hotel bookings their perceptions of price fairness increases and the SF
make easier the PFP.
In relation to the consequences of consumer PFP, we find that DC and satisfaction
with price are present when prices are perceived as fair. However, PFP has no significant
influence on loyalty, although this influence becomes evident indirectly through SP
and DC.
This study has a lot of implications for hotel companies. In this sense, the main
contribution of this paper is that hotel companies can know that factors determine
consumer PFP positively and what consequences could have this perception on the
consumer behavior. It is important to hotel managers know that the consumers use the
RP, FOHB and SF to analyze the prices. So, in the case of RP, we suggest that the
hotel managers can use some alternatives to avoid perceptions of unfair prices such
as: highlighting the quality and benefits that their service has; communicating costs
and providing differentiated services.
Although this study makes some relevant contributions to the existing literature,
it also suffers from a series of limitations. These limitations undoubtedly pave the
way for future research lines. The current economic context may have influenced the
results, so it would be interesting to undertake a long-term study to analyze whether
the current crisis has affected the relationships established in the model tested in this
paper. In the same line, it would also be interesting to perform a cross-cultural study
in order to verify whether culture has a clear influence on the relationships analyzed.
References
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Miguel-ngel Gmez-Borja has a degree in Economics and Business Administration from the University of Valencia and a Ph.D.
in Business Administration from the University of Castilla-La Mancha. Currently, he is Associate Professor of Marketing at School of
Economics and Business of Albacete, Spain. His research is focused
among others on the impact of new information technologies on
retailing management, international retailing, consumer behaviour in
virtual environments and online marketing research tools and applications. He also works on topics related to marketing for non-profit
organizations, developmental aid and sustainable development programs and tools.
Juan-Antonio Mondjar-Jimnez is Ph.D. and Degree in Business Administration by University of Castilla-La Mancha. Degree
in Advanced Studies in Marketing at the same university. Master in
Marketing Research and Master in Art of Economics by Spanish University of Distance. Associate Professor in Marketing at Business
Administration Department. Faculty of Social Sciences of Cuenca.
University of Castilla-La Mancha (Spain). Director and member of
different research projects, have participated in a hundred of Conferences and Congress national and international. Member of the
Editorial Board from different national and international journals.
Author of plus than fifty scientific publications: books, chapters, articles in national and international journals. He is currently Associate
Vice-Chancellor at the University of Castilla-La Mancha. Research
Interest: E-learning, consumer behavior, price perception and tourism
marketing.
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