Differentiated price loss aversion in destination choice: The effect of tourists’ cultural interest

This article looks into the differentiated effects of loss aversion depending on whether individuals show cultural interest when choosing a destination. Based on the fact that perceived value implies not only sacrifices but also the expectations of a certain level of quality and prospects of satisfaction, together with the idea the Prospect Theory applies to tourism prices, the article states the hypothesis that interest in culture when choosing a destination lowers people’s loss aversion. By incorporating the reference-dependent model into a Multinomial Logit Model with Random Parameters – which controls for heterogeneity – the empirical application shows that culture-interested tourists are less loss averse; i.e. the negative effect of finding a higher than expected price diminishes with cultural interest. The expectation of enjoyment of these attributes and the more conscious attitude toward maintenance/restoration activities of cultural sites are hypothesized to lead prices to be evaluated differently when selecting a destination.     

Applying loss aversion to assess the effect of customers’ asymmetric responses to service quality on post-dining behavioral intentions: An empirical survey in the restaurant sector

Using the loss aversion concept, this paper attempts to investigate the relationship between service quality and customers’ post-dining behavioral intentions in the restaurant sector. Incorporating the DINESERV instrument, the results gained from a Chinese chain restaurant indicate that a decrease in service quality from the reference point (customer's expectation) will decrease the perceived service value and customer satisfaction, but that an increase in service quality may not have significant effects on these two behavioral constructs. Moreover, the behavior-related causal relationships underlying service quality suggest that perceived service value and attitudinal loyalty succeed in acting as mediating variables within the model.     

Be a “Superhost”: The importance of badge systems for peer-to-peer rental accommodations

Many sharing-economy websites like Airbnb that offer vacation-rental options for travelers are very popular. However, few studies targeting the vacation-rental industry have investigated online reviews. To narrow this gap, this study focuses mainly on the gamification design developed by Airbnb that awards a “Superhost” badge to hosts who receive good reviews and observes how this can impact an accommodation's review volume and ratings. All available information regarding Airbnb accommodation offered in Hong Kong was retrieved from Airbnb's website. We then constructed a negative binomial model and a Tobit model with different independent variables and controlled a set of variables relating to accommodation characteristics. The results show that an accommodation with the “Superhost” badge is more likely to receive reviews and higher ratings. In addition, guests are willing to spend more on “Superhost” accommodations. Based on our findings, we present implications for research and host practice.     

Communicating quality while evoking loss – How consumers assess extra charges in the Airbnb marketplace

The rise of the sharing economy has allowed consumers to choose from hundreds of thousands of diverse accommodations. In this article, we explore the impact of price partitioning on demand. Our findings reveal that partitioning the price into different elements can have a positive impact on demand. We argue that when the price is partitioned into different fees, it draws attention to the rationale behind the fees – such as additional cleaning. While the presence of the fees acts as a signal, we draw upon prospect theory to argue that the amount of the fee is viewed as a loss and thus has a negative impact on demand. We test our arguments using data on Airbnb's across the whole United States and find that price partitioning positively impacts demand, but the costs themselves have a negative impact on demand.     

When does a service guarantee work? The roles of the popularity of service guarantees and firm reputation

Despite substantial research on service guarantees in the literature, little study has examined how the popularity of service guarantees (SG) in a particular industry affects the effectiveness of SGs. Through four studies, the authors demonstrate an interactive effect between the market-level factor (the popularity of SGs) and the firm-level factor (firm reputation) in affecting consumer's responses to a travel agency's actions in (not) offering an SG. When offering SGs is popular in a given market, consumers perceive a loss from the absence of SGs, and a high-reputation agency will outperform a low-reputation agency in consumer service evaluation when neither agencies offer SGs. However, if both agencies provide guarantees, the SG offered by the high-reputation agency does not necessarily lead to greater service evaluation than that offered by the low-reputation agency. The results reverse when offering SGs is rare in the market, as consumers perceive a gain from the presence of SGs.     

Linking loss aversion and present bias with overspending behavior of tourists: Insights from a lab-in-the-field experiment

Building upon Prospect Theory and Hyperbolic Time Discounting models, we explore how behavioral factors influence the probability of overspending among outbound leisure travelers. We construct our data in two steps. First, we collect demographics and travel-related variables from a random sample of 314 Singaporean tourists across different age groups and income levels. Second, we conduct a field experiment to measure their risk and time preferences, specifically loss aversion and present bias. We then explore the link between the measured preferences to overspending behavior. The findings reveal an interesting link between loss aversion, present bias and traveling expenditure patterns: outbound tourists with high loss aversion and high present bias are more likely to overspend. Finally, our study also highlights the role of group identity in de-biasing. Specifically, individuals are more likely to behave according to standard economic models when making decisions in groups.     

The relationship between price paid and hotel review ratings: Expectancy-disconfirmation or placebo effect?

Whilst there is extant research focusing on the link between hotel reviews and pricing there is scant attention paid to the impact of pricing on hotel review ratings. This paper presents a large scale study based on a novel dataset of more than 44,000 guest review ratings linked to the prices paid for rooms of an European hotel group. Through applying a panel regression analysis we reveal that expectancy-disconfirmation is generally stronger than the placebo effect and higher prices have a negative effect on review ratings, not only when assessing perceived value for money but also when evaluating perceived quality. We identify the trip and guest characteristics which impact on the price-review relationship. Findings provide hotel managers with key quantitative information for simultaneously calibrating quality and revenue targets. Substantial implications include an integrated approach for segmentation as a route to better manage pricing, revenue optimization and reputation.