Left-Digit Effect in Tourists’ Price Evaluations: The Moderating Role of Price Level and Composite Price

Abstract

Past research has found that the effect of odd-ending price (e.g., $9.99) can be explained by the left-digit effect whereby the leftmost digits of both prices influence the comparison of a pair of prices. However, research on psychological pricing has mostly focused on low-priced retailing products and the focal product’s price per se. Informed by prospect theory, this study extended this line of work by examining how the effect of left-digit pricing varies with the magnitude of hotel room rates (i.e., price level) and the size of prior investment in other travel components (i.e., composite price). The results of 2×2×2 experimental revealed that left-digit pricing was an effective tactic to increase purchase intentions for low-priced hotels. It was also found that tourists who have made a substantial prepayment on other travel components were responsive to the tactic. Additionally, composite price and left-digit pricing were found to moderate the relationship between perceived value and purchase intentions.