Will you choose a low-rating hotel that offers promotions? – Insights from the prospect theory

ABSTRACT

Built upon the compensatory decision-making model and anchor effect from the prospect theory, the current research examines the interactive effects of sales promotion and rating disadvantage on the intention to choose a low-rating hotel over a high-rating hotel. A 4 (sales promotions: control vs. monetary vs. non-monetary vs. combined) by 2 (rating disadvantage: small vs. big) scenario experiment was conducted to investigate participants’ hotel choice intentions. Two-way ANCOVA results suggest that respondents’ intention to choose the lower-rating hotel increases when it has a small rating disadvantage and provides a combined promotion (i.e. discount + free gift).

KEYWORDS:

• Prospect theory
• compensatory decision-making
• anchor effect
• online review rating
• sales promotion
• choice set
• rating disadvantage
• intention to choose
• discount
• free gift

Acknowledgments

This work was supported by the University of Nevada, Las Vegas.

Data availability statement

The data set used in this paper is available upon request.

Disclosure statement

No potential conflict of interest was reported by the author(s).