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

Abstract

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.