Has Revenue Management become Acceptable?

Abstract

Demand-based pricing is underused in many service industries, because customers are believed to perceive such pricing as unfair. Fencing can be highly effective in improving the perceived fairness of demand-based pricing. In this study, five fences were explored in a restaurant context across three countries (Singapore, Sweden, and the United States). Demand-based pricing in the form of coupons (two for the price of one), time-of-day pricing, and lunch/dinner pricing were perceived as fair. Weekday/ weekend pricing was seen as neutral to slightly unfair. Table location pricing was seen as somewhat unfair with potential negative consumer reactions to this practice. Furthermore, framing demand-based pricing as discounts improved perceived fairness. The findings were largely consistent for the three countries. Specifically, framing demand-based pricing as discounts or gains showed no country-specific effect.