A Tale of Two Cultures: Consumer Reactance and Willingness to Book Fenced Rates

Abstract

Rate fences are integral to the practice of revenue management. Prior research suggests that cross-cultural differences in consumer reaction to rate fences exist but little is known about why this is so. This research employed two experimental studies with consumers from the United States and South Korea to explore the mechanisms underlying cultural differences in consumer reaction to nonphysical and physical rate fences. In Study 1, we found that feelings of reactance mediate the restriction-based nonphysical rate fence-willingness to book relationship for highly individualistic cultures, but not for highly collectivist cultures. Study 2’s findings suggest that consumers from low-context cultures favor product-based, over service-based, physical rate fences, while consumers from high-context cultures are unlikely to react differently to product-based, and service-based, physical rate fences. Together, the findings of Study 1 and Study 2 provide tourism managers a framework within which geolocation-based pricing strategies, and associated rate fences, can be evaluated.