The role of reference prices in the lodging industry: the moderating effect of an individual’s psychological state

The question of how customers use reference prices is a central issue in the lodging industry. This research examines the effect of one’s psychological state, namely sense of power, on the relative use of two reference prices in price evaluations. The study used 2 (power: high vs. low) × 2 (reference price: internal vs. external) × 2 (reference price level: high vs. low) between-subjects experiment. The results indicate that powerful individuals are more influenced by an internal reference price while their powerless counterparts tend to rely on an external reference price. In addition, price judgment mediates such hypothesized interaction on consumers’ willingness to book.