The impact of intermediate option availability on consumers' choice: The moderating role of price roundness

• Published in: International journal of hospitality management 2024-09, Vol.122, p.103869, Article 103869
• Main Authors: Lee, Eunji, Yhee, Yerin, Kim, Jungkeun, Shin, Seunghun, Koo, Chulmo
• Format: Article
• Language: English
• Subjects: Compromise effect; Market segmentation; Premiumization; Psychological price effect; Rounded price effect
• ISSN: 0278-4319
• DOI: 10.1016/j.ijhm.2024.103869

Given the surge in consumer demand and rapid inflation, businesses have turned their attention to premiumization as a means of market segmentation. Building upon previous studies that highlight the significance of the compromise effect in gaining market share for intermediate options, this research examines the feasibility of revenue management strategies using 'psychological pricing' in hospitality and tourism products. By investigating choice behaviors related to intermediate options, we explore how subtle pricing manipulations can enhance the compromise effect. Through five experiments, we validate our hypotheses. Our findings not only extend the literature on pricing behavior and hospitality concerning rounded pricing but also provide insights on how to strategically adjust psychological pricing to align with real-time market conditions. •This research proposes psychological pricing strategies that consider segmented hospitality products.•This research finds that rounded prices enhance the compromise effect of intermediate options.•This research suggests hospitality companies can manage revenue effectively using psychological pricing tailored to their sales situations.