The Antecedents and Consequences of Price Fairness in Tourism

Abstract

Pricing strategies (e.g. yield management) in the tourism industry, known as non-transparent pricing, have raised fairness issues, and more recently, new pricing schemes in the airline industry have been controversial issues in terms of price fairness. Nonetheless, few tourism researchers have studied price fairness from a consumer perspective. Thus, an understanding of the cognitive processes associated with perceived price fairness could have far-reaching implications for tourist behavior research. The purpose of this study was to examine the antecedents and consequences of tourists‟ perceived price fairness of the ancillary revenue (i.e. extra fees of airlines). In particular, a conceptual model was based on Weiner's (1980) attribution theory, which was expected to complement shortcomings of the traditional dual entitlement principle (Kahneman, Knetsch, and Thaler, 1986). Following the study purpose, four objectives of the study were established: (1) to examine the dimensionality of price fairness in a price change context; (2) to examine the antecedents of price fairness; (3) to examine the consequences of price fairness; and (4) to compare differences in the price fairness model between high and low price sensitivity groups. To achieve the study objectives, this study developed a conceptual model of price fairness with three antecedents (price comparison, cognitive attribution, and emotional response) and four consequences (behavioral loyalty, willingness to pay, complaining, and revenge), and determined the model that best predicted the hypothesized model using Structural Equation Modeling. Data were collected from an online survey and the respondents (n=524) were leisure travel passengers in the United States who had taken domestic flights in the past 12 months. The initial model fit the data well from a global perspective, yet, some hypotheses were not supported. Results suggested that price comparison evaluation and cognitive attribution are antecedents to price fairness, but emotional response was found to be influenced by price fairness as opposed to what was hypothesized. It was also revealed that while price fairness directly influenced favorable behavioral intentions (e.g. behavioral loyalty and willingness to pay more), it also influenced unfavorable behavioral intentions (e.g. revenge and complaining behavior), mediated by negative emotional response. The revised model was alternatively proposed. In addition, significant differences in price fairness, emotional response, willingness to pay more, and revenge intention between high and low price sensitivity groups were found. Results of this study provide potentially important direction for the development of a theoretical framework for the conceptualization of antecedents and consequences of price fairness in a tourism context. It is further expected that findings of this study from an attributional perspective provide managerial guidance for the utilization of marketing strategy when a company encounters inevitable price increases or extra fees