Exploring effective price presentation format to reduce decision difficulty and increase decision satisfaction

Abstract

Variable pricing is frequently employed by service firms that adopt revenue management practices. This strategy is effective in stimulating and increasing revenue by appealing to customers with different levels of price sensitivity. However, by providing excessive price options, a company may cause choice overload for customers. Within the framework of behavioral economics, this study explores an effective price presentation strategy to mitigate choice overload due to a large assortment size of price options in the context of hotels. The findings of the experimental design study suggest that the number of categories that distinguish and organize price options positively affects consumers' perceived decision difficulty and consequent decision satisfaction when a large assortment size of price options is provided. This research extends the understanding of the effect of variable pricing on consumers' responses and provides marketers with guidance on how to manage variable pricing and its price presentation format.