The role of internal and external reference prices in the lodging industry

Open Access
Choi, Choongbeom
Graduate Program:
Hotel, Restaurant, and Institutional Management
Doctor of Philosophy
Document Type:
Date of Defense:
June 22, 2015
Committee Members:
  • Anna S Mattila, Dissertation Advisor
  • Anna S Mattila, Committee Chair
  • David Allen Cranage, Committee Member
  • Seoki Lee, Committee Member
  • Lisa Elizabeth Bolton, Committee Member
  • reference price
  • price evaluation
  • lodging industry
A large body of pricing research has identified the effect of reference prices on price evaluations in the context of frequently purchased package goods (FPPG). However, a limited number of research has been examined the relative use of an internal reference price (IRP) versus an external reference price (ERP) in the context of lodging services where the dynamic pricing practice is prevalent. In an attempt to address such a gap, study 1 examined how pricing characteristics of the lodging services shift consumers’ sensitivity to two different reference prices (i.e., IRP and ERP) and therefore influence their price evaluations of the target service. Compared with the IRP, the results showed that consumers are more sensitive to and affected by the ERP. The results of study 1 also demonstrated that information accessibility and perceived diagnosticity are key mechanisms that lead the differential effect of IRP versus ERP on consumers’ price evaluations of the target service. In addition, study 2 examined the effect of an individual’s sense of power on the use of IRP and ERP in price evaluations. The results of study 2 showed that individuals with high sense of power are more influenced by IRP than ERP while individuals with low sense of power rely solely on ERP during the price evaluations process. In sum, the current research demonstrated that the relative use of IRP and ERP is contingent upon both product and consumer characteristics. Finally, theoretical and empirical contributions of the present study are discussed as well.