Abstract
In revenue management practice, customers’ perceived fairness is a critical issue. Prior research examined the effect of revenue management on customers’ perceptions of fairness by implementing two different conditions: fencing and framing. In this study, the authors evaluated the role of a service firm’s environmentally friendly reputation under the conditions of fencing and framing. Results indicated that an environmentally friendly reputation only moderated the effect of framing on perceived fairness. In particular, when the firm had a poor reputation, framing as a discount rather than framing as a surcharge increased customers’ fairness perceptions. When the firm had a good reputation, however, customers’ perception of fairness did not differ across two framing conditions. The findings of this study help firms to understand how customers perceive fairness in revenue management practice.
Highlights
Revenue management (RM) is one of the most commonly adopted practices in the hospitality and airline industry as a way to maximize profits by selling perishable assets such as hotel rooms and airline seats, under the mechanism of controlling prices and inventories [1,2]
It is believed that a service provider’s reputation is a byproduct of buyer–seller relationships [12], and the current study aims to identify whether the level of environmentally friendly reputation plays a key role in operationalizing price fairness when implementing RM practices
The current study explores the impact of framing on the perceived fairness of rate fence in the service industry
Summary
Revenue management (RM) is one of the most commonly adopted practices in the hospitality and airline industry as a way to maximize profits by selling perishable assets such as hotel rooms and airline seats, under the mechanism of controlling prices and inventories [1,2]. The two most prevalently used techniques are rate fence and framing, which are known to affect customers’ perceived fairness [3,6]. Kim and Wirtz [6] find that properly designed rate fences assist service providers in effectively charging lower prices for those who are willing to accept certain restrictions on their purchase. They show that customers are more favorable toward a rate framed as a discount than a rate presented as a surcharge when price fairness comes into play [3]. Prior research documents whether there can be a crucial factor that moderates the effects of fencing and framing conditions on customers’ fairness perceptions
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