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International Journal of Hospitality Management 35 (2013) 316326

Contents lists available at ScienceDirect

International Journal of Hospitality Management


journal homepage: www.elsevier.com/locate/ijhosman

Restaurant revenue management: Do perceived capacity scarcity and


price differences matter?
Cindy Yoonjoung Heo a, , Seoki Lee b , Anna Mattila c , Clark Hu d
a

School of Hotel and Tourism Management, The Hong Kong Polytechnic University, 17 Science Museum Road Tsim Sha Tsui East, Kowloon, Hong Kong
School of Hospitality Management, The Pennsylvania State University, 201 Mateer Building University Park, PA 16802, United States
School of Hospitality Management, The Pennsylvania State University, 201 Mateer Building University Park, PA 16802, United States
d
Beijing Union University, Beijing, China
b
c

a r t i c l e

a b s t r a c t

i n f o

Keywords:
Restaurant revenue management
Fairness perception
Perceived scarcity
Capacity limitation
Commodity theory

Revenue management (RM) has become an indispensable strategic tool in capacity-constrained service
industries whose total revenue often depends on the abilities of rms to use capacity efciently. The
restaurant business is similar enough to traditional RM industries such as hotels and airlines, but restaurants also have unique characteristics that pose special challenges to restaurant operators. Among the
unique characteristics of restaurants are the relative exibility of service capacity and the exible duration of a meal, which are important subjects to be considered in the implementation of RM practices. In
addition, when a restaurant operator practices a demand-based variable pricing policy to adjust demand,
the magnitude of the price differences may inuence fairness perceptions of the policy. Based on the commodity theory and the equity theory, this study hypothesizes that two main effects, namely, perceived
scarcity of capacity in a restaurant and price differences, inuence the perceived value of a restaurants
offerings and the fairness perceptions of a restaurants RM practices. As hypothesized, the negative effects
of price difference on fairness perceptions are supported by the results. However, ndings suggest that
perceived scarcity of capacity inuences neither the perceived value of a restaurants expected offering
nor the fairness perceptions for a restaurants RM practices.
2013 Elsevier Ltd. All rights reserved.

1. Introduction
Revenue management (RM) has become an indispensable
strategic tool in capacity-constrained service industries whose total
revenues often depends on the abilities of rms to use capacity
efciently. As the service provider reaches capacity, limitations
restrict ability to serve additional customers. A restaurant, for
example, may have insufcient seating capacity during the peak
midday period typically for serving lunches. Indeed, most service
providers face some type of capacity constraint (Desiraju and
Shugan, 1999) and the combination of perishability and capacity
constraints encourage service rms to focus on efciently capitalizing on existing capacity.
The capacity of a service rm is dened as the highest quantity of output possible in a given time period with a predened
level of stafng, facilities, and equipment (Lovelock, 1992, p. 26).
Measurement of capacity involves both physical and non-physical
aspects. For example, physical capacity may be the number of seats
(for airlines) and the number of rooms (for hotels). Non-physical

Corresponding authors. Tel.: +1 852 9735 4004.


E-mail address: hmcindyh@polyu.edu.hk (C.Y. Heo).
0278-4319/$ see front matter 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.ijhm.2013.05.007

capacity is usually time-based and reects the notion of physical


capacity occupied during certain periods of time, such as seating
hours in restaurants and tee-times for golf courses. The capacity of
a service rm is usually xed over the short term, and thus the
rationale for RM is the efcient use of xed, perishable capacities by charging customers different prices for identical services
in an attempt to balance demand and revenues per capacity unit
(Kimes, 1989a; McGill and Ryzin van, 1999). RM practitioners apply
concepts, such as market segmentation, demand forecasting, and
variable pricing, to ensure maximizing the service rms revenue
from limited capacity by adjusting prices to the highest possible for
any given situation (Ng, 2007).
Kimes (1989a, 1989b) identied a number of preconditions
for the successful application and effective operation of RM. In
general, to gain additional revenues and prot, RM practices suit
service industries that have perishable inventory, xed capacity,
high-xed/low-variable cost structures, variable demand, and segmented markets (Kimes, 1989a, 1989b; Berman, 2005). In addition,
reservation systems can aid management of demand forecasting by calculating inventory units prior to consumption. Airline,
hotel, and rental car industries represent traditional RM industries because they share those similar characteristics (Chiang et al.,
2007).

C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

The restaurant sector is sufciently similar to hotels and airlines operations that RM practices are applicable for strategic
planning. However, restaurants also have unique characteristics
that pose special challenges, requiring operators to be creative in
developing appropriate RM strategies. Among the unique characteristics of restaurants are the relative exibilities of capacities
and the exible durations of meals, and these represent important subjects for consideration when implementing RM practices.
Unlike airlines and hotels, restaurants have somewhat more exible capacities, for example, a restaurant may have available outdoor
patios for extra seating during pleasant weather and peak patronage periods. Moreover, the total available seating capacity per day
in a restaurant is not xed since customers seating durations are
unpredictable. Restaurant operators may need to understand how
customers perceive the capacity limitations of restaurants. This
knowledge is important because customers are mostly familiar
with RM practices in traditional RM industries (e.g., airlines or
hotels) with xed capacities; perceptions of the relatively exible
capacity of restaurants may inuence customers perceptions of RM
practices.
In addition, when a restaurant operator practices a demandbased variable pricing policy, the magnitude of the price differences
may inuence fairness perceptions of the policy. The responses of
customers to restaurants RM practices are critical to successful
application of RM in restaurants because revenue maximization is
only attainable when customers accept the RM practices without
dissatisfaction. Previous literature suggested that perceptions of
value (e.g., Dodds, Monroe, and Grewal, 1991; Grewal, Monroe, and
Krishnan, 1998; Monroe, 1990; Rao and Monroe, 1989) and fairness
in service exchanges (e.g., Maxwell, 2002) are important factors
for sustaining customer satisfaction, positive behavioral intentions,
and consequently, long-term protability. To sustain customer satisfaction and to maintain positive relationships with customers,
and for successful implementation of RM, customers perceptions of
RM, such as perceptions of value and fairness, are necessary considerations, coinciding with the characteristics of industries (Chiang
et al., 2007: Heo and Lee, 2009).
RM has had application to the restaurant industry, but prior
research offered a limited number of specic strategies for implementation (Kimes et al., 1998; Susskind et al., 2004). Restaurants
offering promotions, such as happy hour and early bird specials, only focus on discounts during low-demand periods. The core
element of RM is to charge premium prices during high-demand
periods based on capacity limitation. However, the potential for
customers dissatisfaction have discouraged restaurant operators
from applying various types of RM approaches, including demandbased pricing (Kimes and Wirtz, 2003a). Therefore, the current
study focuses on customers perceptions of a scarcity of capacity
in restaurants and customers varying reactions to price differentials in terms of the perceived value of a restaurants offerings and
the perceptions of RM practices fairness.

2. Literature review
2.1. Restaurant revenue management
Capacity utilization is a major concern for restaurants when
attempting to maximize revenue because restaurants have, by
nature, relatively limited space, relatively high xed costs, and no
inventory opportunities. However, restaurants unconcerned with
limited space, such as takeout restaurants that market the meal
without associated space and time, may have limited interest for
applying RM to maximize revenues. Kimes (1999) argued that the
principles of RM can apply to restaurants given that the unit of
sale in restaurants is the time required for service rather than just

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the meal. RM is more applicable to restaurants enjoying demand


greater than seating capacity during peak times (e.g., Friday dinner). These types of restaurants can increase revenue by managing
demand and controlling the customers seating duration.
Kimes (1999) and Kimes et al. (1998, 1999) were among the rst
to address the issue of restaurant RM. They developed a strategic
framework for applying RM to restaurants to increase revenue by
effectively managing seating durations and demand-based pricing.
They proposed using the revenue per available seat hour (RevPASH:
revenue accrued in a given time interval divided by the number
of seats available during that time). RevPASH indicates the rate at
which capacity utilization generates revenue, and it increases as
the number of tables turnover increases and the length of seating durations decrease. Kimes et al. (1998) suggested managing
seating duration and customers arrival as methods for demand
management. Seating duration (subsequently, duration of a meal)
is the length of time that a customer occupies a seat in a restaurant; its importance arises from governing the availability of seats
(Kimes et al., 1998). By reducing variations in meals durations,
restaurant operators can manage reservations and seating decisions more effectively (Kimes, 1999; Kimes and Chase, 1998; Kimes
et al., 1998).
Based on the argument of Kimes et al. (1998), several researchers
expanded the discussion of the relevant issues for controlling the
duration of meals. For example, Kimes and Robson (2004) discovered that seating durations in midscale restaurants vary based on
table characteristics such as table type and table location. Kimes
and Thompson (2005) reported the average duration of a meal
by party size and day of week for midscale restaurants. Bell and
Pliner (2003) showed that meal durations increase with party size
among several restaurant contexts. Kimes et al. (2002) discovered that Europeans preferred a signicantly longer dining time,
while North Americans and Asians share similar meal duration
expectations. Noone and Kimes (2005) examined the effects of
reduced durations on the satisfaction of customers and their intentions to return to the restaurant, and found duration reduction
strategies can directly and negatively inuence customers satisfaction. Noone et al. (2007) found that an exceedingly fast pace
during a meal diminishes customers satisfaction. More recently,
Noone et al. (2009) found that the overall relationship between
a perceived service encounters pace and satisfaction follows an
inverted U-shape. Thompson (2009) conducted a simulation-based
study and found that on average, the revenue bump experienced by
decreasing dining duration is less than one-quarter of the amount
predicted by the common assumption that a reduction in dining
duration yields a proportional increase in revenue.
Some researchers are more interested in maximizing revenue by increasing efciency of restaurants operations. Sill and
Decker (1999) proposed the use of capacity management science
(CMS) as a systematic approach to evaluate the capacity potential
and process efciency of a restaurant. CMS includes monitoring
every element of service and of the production delivery process
with quantiable measurements to enhance customer satisfaction, improve employee satisfaction, and increase protability.
Quain et al. (1998) and Muller (1999) identied managerial factors that may improve the efciency of restaurants; those factors
include dening prot centers, dispersing demand, reducing operating hours, and decreasing service time by improving efciency, as
much as possible, of restaurants operations. Similarly, Kimes et al.
(1999) suggested recommendations for the application of restaurant RM such as training employees, developing standard operating
procedures, and improving table management to increase the efciency of restaurant operation. Thompson (2002, 2003) focused on
restaurants that do not allow reservations and found that having
appropriately sized tables in positions to allow rearrangement with
other tables to serve larger parties can yield additional revenue at

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C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

virtually no added cost. Bertsimas and Shioda (2003) developed two


classes of optimization models to maximize revenue for a restaurant. The two-step procedure proposed included using a stochastic
gradient algorithm to decide, a priori, how many future reservations to accept, and using approximate dynamic programming
methods to decide, dynamically, when to seat an incoming party
during the operational day. Susskind et al. (2004) found that customers are willing to shift their dining times to off-peak hours in
exchange for discounted pricing. Dickson et al. (2005) suggested
incentive strategies with a reservation system that can manage
shifting demand so that arrivals match capacities.
Other researchers focused on fairness perceptions of various RM
techniques in restaurants. For example, Kimcs and Wirtz (2002)
examined perceived fairness of ve types of RM pricing in restaurants and found that framing demand-based pricing as discounts
rather than as surcharges made consumers perceive RM practices to
be fairer. However, only a few studies explored RM from customers
perspectives. These studies focused on fairness perceptions for RM
techniques or the inuence of the techniques on customers satisfaction. Although demand-based variable pricing has proven to
be successful in other service businesses such as airlines and hotels
where customers nd demand-based pricing to be more acceptable
or fair, restaurants have greater constraints in use of demandbased, variable pricing (Kimes and Chase, 1998). However, Kelly
et al. (1994) suggested demand-based menu pricing as a method of
managing revenue, by arguing that a 1% increase in price can yield
as much as a 20% improvement in prots. They also claimed that a
demand-based approach to menu pricing is predictable from customers perceptions of a restaurants value because customers focus
more on value than on price. Kelly et al. suggested that for future
menu-pricing strategies, restaurants should consider the demand
uctuation. Heide et al. (2008) also investigated different pricing
strategies for restaurants and concluded that a potential exists
for increased use of various revenue-enhancing strategies such as
price discrimination, peak-load pricing, and bundling. However, the
depth of extant studies on RM practices applied to restaurants is
fairly shallow (Bertsimas and Shioda, 2003). A theoretical approach
would identify the underlying factors that form perceptions of fairness among customers to advance restaurants RM practices.
2.2. Commodity theory and perceived value
Commodity theory explains how individuals respond to scarcity
by claiming that values of commodities reect the extent of unavailability (Brock, 1968). Hypothetically, a commodity represents
anything capable of being possessed, has use, and is transferable
from one person to another (Brock, 1968) and encompasses both
material goods and intangible services. Value refers to increases
in perceived utility or perceived desirability (Brock and Brannon,
1992). Unavailability refers to scarcity and other limits on availability. Typically, the concept has been interpreted as limits in
supply or in the number of suppliers, costs in acquiring or providing,
restrictions limiting possession, and delays in providing a commodity (Lynn, 1991). In the literature, the terms unavailability and
scarcity are commonly interchangeable.
Based on the commodity theory, the inuence of scarcity on
the valuation of goods has been studied extensively (Lynn, 1991,
1992; Mittone and Savadori, 2009; Verhallen, 1982; Vehallen
and Robben, 1994). Building on the commodity theory, several
researchers tested four propositions: A product or service will be
more attractive (1) when the numbers of suppliers are limited;
(2) when a supplier imposes a restriction on availability; (3)
when a consumer has to wait to gain the product, and (4) when
the consumer needs to exert extra effort to obtain the product
(Brock, 1968; Brock and Mazzocco, 2004). Researchers in psychology and marketing found that knowledge of a products scarcity

affects consumers perceptions and evaluations of the attractiveness, desirability, expensiveness, quality, and taste of a product. For
example, Verhallen (1982) found that people showed greater preference for a recipe book perceived to be scarce. Lynn (1989) also
found that artwork perceived as scarce was more desirable than
paintings perceived to be readily obtainable. Recently, Aggarwal
et al. (2011) tested the relative effect of two types of scarcity messages (limited-quantity and limited-time) on customers purchase
intentions and found that the limited-quantity messages are more
effective than limited-time messages in inuencing the purchase
intentions of consumers.
Several researchers examined the inuences of perceived
scarcity on customers perceptions of pricing. Lynn and Bogert
(1996) examined the effect of scarcity on an anticipated price
appreciation and found that scarcity increased the anticipated price
appreciation of collectible products. They argued that although
scarcity does not affect the actual potential of a product for price
appreciation, news reports of scarce collectibles that have appreciated in value might lead people to develop naive economic
theories and associate scarcity with price appreciation. Suri et al.
(2007) examined how perceived scarcity inuences consumers
processing of pricing. During scarcity, consumers perceived quality and monetary sacrice showed different patterns in responses
that depended on the relative price level and motivation of consumers to process information (Suri et al., 2007). The study found
that a high price along with high-motivation, perceived quality
and value as well as purchase intentions increased during scarcity,
supporting the hypothesis that motivation to process information
moderates the effects of scarcity on information processing. The
researchers argued that an increase in perceived value of an offer
depends on whether or not application of pricing serves a greater
role to evaluate perceived sacrice or perceived quality.
However, a few researchers argued that the appeal of scarcity
does not necessarily result in favorable perceptions for the scarce
product because potential purchasers scrutinize an offer more thoroughly (Brannon and Brock, 2001; Brock and Brannon, 1992; Inman
et al., 1997). A liberalization of the commodity theory proposed by
Brock and Brannon (1992) included three modications: (1) extension of the domain from any conveyable and possible object to traits
and skills, (2) extension to negative objects, and (3) identication
of cognitive elaboration as a mediator between scarcity and evaluative polarization. Brock and Brannon (1992) argued that when
negatively valenced objects, for which an individual might have a
clear aversion, are scarce, the original notion of usefulness is discarded. Moreover, a negatively valenced experience gains greater
aversive perceptions to the extent of its rarity.
Based on the commodity theory, the ndings of the majority of
the research suggest that when individuals perceive a scarce product as unique or valuable, scarcity will elicit positive feelings for the
product. From the positive perspective of scarcity, the commodity
theory should predict an increase in attractiveness of a restaurants scarce capacity and perceived value of the dining experience.
Therefore, this study proposes the hypothesis:
H1: The perceived scarcity of capacity in a restaurant will positively inuence the perceived value of that restaurants expected
offering.

2.3. Equity theory and fairness perception


The equity theory, proposed by Adams (1965), focuses on an
individuals perception of fairness with respect to a relationship.
The theory postulates that individuals consider what they put into a
given situation relative to what they gain from it and then compare
the evaluation with the inputs and outcomes of others. If the relationships are inferentially inequitable or unfair, individuals may

C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

become resentful, angry, and uncooperative, eventually employing


strategic actions to return to a position of equity.
Researchers dened fairness as a judgment of whether or not
procedures reach an outcome, and/or if the outcome itself is reasonable, acceptable, and just (Bolton et al., 2003; Mauri, 2007; Monroe
and Xia, 2005). Perceptions of fairness are not only driven by outcomes but are also inuenced by the fairness of the process and
interpersonal treatment. In other words, distributive fairness refers
to perceived fairness of the outcomes allocation (Adams, 1965;
Deutsch, 1975), while procedural fairness relates to the process,
methods, and rules used to reach outcomes (Leventhal, 1980; Lind
and Tyler, 1988).
Perceived fairness appears to be an important part of sustaining
customer satisfaction, loyalty, and long-term protability (Kimes
and Wirtz, 2003a; Thaler, 1985; Kahneman et al., 1986; Urbany
et al., 1989). Customers believe that the value to the rm should
be equal to the value to the customers (Kahneman et al., 1986). If
that relationship becomes unbalanced, increased value for the rm
or decreased value for the customer, the customer may perceive
subsequent transactions to be unfair (Kimes, 1994). Therefore, if
customers perceive an RM practice as an unfair policy, such negative perceptions may engender dissatisfaction with the service
or product. Consequently, increased revenues accruing from RM
practice may be short-term (Kimes, 2002; Hoang, 2007).
In the RM context, fencing conditions, framing of rate fences,
familiarity with RM practices, and information disclosure of rate
fences have all been found to have effects on fairness perceptions
(Choi and Mattila, 2005; Wirtz and Kimes, 2007). Rate fences refer
to rules and policies that a company uses to decide who receives
what price and to distinguish one transaction from another (Kimes
and Wirtz, 2003b). Kimcs and Wirtz (2002) showed that the presentation of a rate fence to customers inuences customers fairness
perceptions for six RM practices in the golf industry. Kimes and
Wirtz (2003a) also examined customers perceptions of the fairness
of ve demand-based pricing methods in the restaurant industry.
The study found that the perceptions of RM pricing in the form of
coupons, time-of-day pricing, and lunch/dinner pricing were fair,
while perceptions of weekday/weekend pricing were neutral to
slightly unfair, and table location pricing gained a somewhat unfair
perception. Framing effects refer to the phenomenon wherein
people respond differently to varying descriptions of the same condition (Frisch, 1993). The prospect theory posits that individuals
value gains and losses differently even if the situations are economically equal (Kahneman and Tversky, 1979; Thaler, 1985). According
to framing effects and the prospect theory, when framing prices as
a gain from the perspective of a customer, the customer becomes
more favorably disposed and accordingly perceives pricing fairness
than when framing those prices as a loss for the customer.
Wirtz and Kimes (2007) examined the effects of familiarity with
RM pricing, framing of prices, and fencing conditions and found that
familiarity moderated the effects of framing and fencing conditions
on customers fairness perceptions. Moreover, Choi and Mattila
(2005) found that customers perceptions of fairness increased
when customers were aware of the various reservation factors
affecting room rates. When informed, of these policies, ratings of
perceptions of fairness increased compared with customers having
limited-information. Therefore, a restaurant adopting RM practices should develop reasonable rate fences with favorable framing
from customers perspectives to enhance distributive fairness
perceptions, and should attempt to inform customers of the methods for determining prices to increase perceptions of procedural
fairness.
Considering the aforementioned issues, when restaurants
implement RM practices and develop rate fences to manage capacity, they need to understand how customers may perceive capacity
limitations and respond to price differences between high-demand

319

and low-demand periods. Considering such factors is important


because customers familiarity with RM practices is mostly for
pricing policies in RM industries with xed capacities, and their
perceptions may inuence procedural fairness. In addition, the
pricing difference may relate to distributive fairness. The equity
theory demonstrates that customers compare the ratio of inputs
and outcomes (i.e., the service offerings and prices) available to
them with those obtained by other customers (Hunt and Kernan,
1991; Huppertz et al., 1978), emphasizing the need to justify different rates (Xia et al., 2004). Perceived scarcity of capacity is likely
to relate to perceived fairness of RM practices because information
that provides reasons for setting a certain price may inuence perceptions of prices (Xia et al., 2004). Apprehension for scarcity of
capacity in restaurants may enable customers to understand the
reasons for RM practices, such as differential prices between highand low-demand periods, thus increasing perceptions of fairness.
Empirical studies discovered that the information for determining
a price point has a signicant effect on perceptions of pricing fairness (Choi and Mattila, 2004). Therefore, this study proposes the
hypothesis.
H2: Perceived scarcity of capacity in a restaurant will positively inuence fairness perceptions toward that restaurants RM
practices.
2.4. Customer perceptions of the price differences
Assuming that price inuences the decisions of customers
because price serves as an indicator of purchase cost (Monroe,
1973), price is one of the most effective variables that rms can
manipulate to encourage or discourage demand in the short term
(Bitran and Caldentey, 2002). In particular, demand-based variable pricing policies have had frequent application in traditional
RM industries, such as airlines and hotels. Demand-based variable
pricing policies assist a company in increasing revenues: by charging the less price-sensitive market segments premium prices and
by simultaneously charging discounted prices to price-sensitive
market segment, which encourages increased sales, which offset the reduction in price. Although restaurants may be more
limited than hotels and airlines in varying prices according to
actual demand, opportunities remain for restaurants to implement
such practices based on predictable demand. Restaurants can apply
demand-based differential pricing to balance customers demand
with existing capacities. Restaurants may impose full rates during
high-demand periods (e.g., Friday and Saturday nights) and provide
discounts during low-demand periods (e.g., Wednesday night). By
doing so, restaurants can segment customers by acceptable prices
and provide tables only to those willing to accept higher prices
when demand exceeds capacity. If price-sensitive customers are
aware of the pricing policy, a demand-based differential pricing
policy should allow price-sensitive customers to adopt advantages
from day-of-the-week discounts. Thus, restaurants can expect
decreasing numbers of customers during peak periods and increasing numbers of customers during slow periods. Most restaurants
experience higher demand on weekend evenings than weekday
evenings, but due to the potential for prompting customers dissatisfaction, restaurant operators are reluctant to raise prices in
response to that high demand (Kimcs and Wirtz, 2002). However, if customers perceive demand-based pricing to be unfair, the
restaurant may suffer business losses (Kimcs and Wirtz, 2002). Furthermore, the magnitude of the price difference between high- and
low-demand periods may inuence the responses of customers to
price differences, and patronage decisions. First, this price perception hypothesis has a theoretical foundation in the adaptation-level
theory of Helson (Monroe, 1973), whose basis is the assumption
that stimuli are judged with respect to internal norms representing the pooled effects of present and past stimulations (Kalyanaram

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C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

and Winer, 1995). According to the adaptation-level theory, assessments of stimuli differences depend on the magnitude of the
standard against which the assessments are made, and behavioral
responses of individuals to stimuli represent modes of adaptation to environmental and organismal forces (Helson, 1964). In
a pricing context, the adaptation-level theory suggests that price
perceptions rely on the actual price and on the reference price or
adaptation level of the customer. Furthermore, the adaptation level
is a function of the magnitude of a series of stimuli, the range of
stimuli, and the dispersion of stimuli from the mean.
Second, the assimilation-contrast theory (Sherif and Hovland,
1958) states the existence of regions that are internal to peoples perceptual judgments, namely, latitude of acceptance, latitude
of rejection, and latitude of non-commitment. A new stimulus
that falls within the latitude of acceptance may be acceptable,
and consequently assimilate, while the stimulus that falls within
the latitude of rejection is unacceptable or objectionable. In the
context of price evaluations, latitude of acceptance consists of
an acceptable price range encompassing a reference point; latitude of rejection translates into an unacceptable price range,
and latitude of non-commitment constitutes a range of neither
acceptable nor unacceptable prices. Thus, the assimilation-contrast
theory suggests that the price differences falling within consumers acceptable price ranges are either accepted or assimilated
(Blair and Landon, 1981; Liefeld and Heslop, 1985). In other
cases, when price differences fall outside the acceptable price
range, they are contrasted or rejected (Monroe and Petroshius,
1981).
When a restaurant charges different prices for the same menu
on different days of the week, consumers may perceive the quality of food and service to be the same, but the prices are different.
As a result, as the price difference increases, the perceived value
will decrease. The price difference will also have a negative inuence on fairness perceptions toward RM practices in restaurants.
The assimilation-contrast theory suggests that price differences
outside the acceptable range are contrasted or rejected (Monroe
and Petroshius, 1981). Therefore, if the price during high-demand
periods falls outside the acceptable range, that conditions may negatively affect the perception of fairness toward the restaurants RM
practices. Therefore, this study proposes the hypotheses:
H3: The price difference between low-demand and highdemand periods will negatively inuence the perceived value of the
restaurants expected offerings. In other words, the higher the price
difference is, the lower is the perceived value of the restaurants
expected offerings.
H4: The price difference between low-demand and highdemand periods will negatively inuence perceptions of fairness of
the restaurants RM practices. In other words, the higher the price
difference is, the lower the perception of fairness perceptions of the
restaurants RM practices.
In addition, Brock and Brannon (1992) argued that consumers
tend to assume scarce things are more expensive than available
ones, and that expensive things are often assumed to be of better quality and reect higher status than inexpensive commodities.
Although Brock and Brannon did not empirically test the relationships, the study proposed perceived expensiveness as a moderator
of scarcity effect. Therefore, the positive relationship between
perceived scarcity and perceived value of the restaurants expected
offerings may be stronger when price differences between lowdemand and high-demand periods are large than when price
differences are small. In addition, the positive relationship between
perceived scarcity and perceptions of fairness of the restaurants
RM practices may be stronger when the price differences are large.
Therefore, the current study proposes hypotheses:
H5: The price difference between low-demand and highdemand periods will moderate the relationship between perceived

Table 1
Experimental design.
Constructs

Levels

PS (perceived scarcity)

No

Low

High

PD (price difference)

10%

20%

30%

40%

scarcity of capacity in the restaurant and the perceived value of the


restaurants expected offerings.
H6: The price difference between low-demand and highdemand periods will moderate the relationship between perceived
scarcity of capacity in the restaurant and perceptions of fairness for
the restaurants RM practices.
The basic assumption of these hypotheses, however, is that
a restaurant in this study faces capacity limitation during highdemand periods. Restaurants unconcerned with limited dining
space (for example, takeout restaurants that market the meal itself
rather than space and time) may not be appropriate considerations
for this study.
3. Methodology
3.1. Design of the study
This study used three (scarcity of capacity: No, Low, or High) by
four (price difference: 10%, 20%, 30%, or 40%) factorial, betweensubjects design to test the hypotheses (Table 1). More specically,
the study adopted factorial analysis of covariance (ANCOVA) to
examine not only main effects but also moderating effects.
This study used written scenarios to manipulate the perceived
scarcity of capacity in restaurants and the price differences between
high- and low-demand periods. A sample scenario appears in
Appendix A. From the literature, unavailability refers to scarcity and
other limits on availability (Lynn, 1991); thus, these terms provide
the basis for the concept of perceived scarcity of a restaurants
capacity. The survey used in the study includes two questionnaire items, limitedness and availability, to perform a manipulation
check for the perceived scarcity construct.
This study developed a questionnaire for the context of dining
in a casual restaurant and uses a design with relevant constructs
based on scales adopted from previous research. Some adjustments to the questionnaire were necessary to reect the specic
characteristics of restaurants, and. employs a seven-point Likert
scale to measure each item in the questionnaire. Perceived value
represents consumers overall assessment of the utility of a product based on perceptions of what is received and what is given
(Zeithaml, 1988, p.14). The survey includes three direct measures
to capture customers perceived value, adopting measures from
Cronin, Brady, and Hult (2000) with modications for the context
of restaurants. Consistent with the studies by Kukar-Kinney, Xia,
and Monroe (2007), measures for procedural fairness and distributive fairness use a set of four items: fair, acceptable, unfair, and
satisfactory. Kukar-Kinney et al. (2007) adapted this measure from
the study of Campbell (1999) and added additional items to measure pricing policy, fairness (procedural fairness), and price fairness
(distributive fairness).
In addition to the main factors, the current study includes three
covariates in factorial ANCOVA to enhance the internal validity:
tolerance-of-crowding, familiarity with RM, and gender. Perceived
scarcity of capacity in a restaurant may relate to customers perceptions of crowding. Therefore, a tolerance-of-crowding measure,
adopted from Machleit et al. (1994), was included as a covariate in
the factorial ANCOVA. Moreover, previous research found that the
familiarity of customers with RM practices has an impact on fairness perceptions toward RM (e.g., Taylor and Kimes, 2010; Wirtz

C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

and Kimes, 2007). Wirtz and Kimes (2007) suggested that as customers become more familiar with RM practices, the unfairness
perceptions decline, over time, because familiarity tends to adjust
customers reference-points for transactions and prices, resulting
in lower or even no impact on perceptions of pricing fairness. Thus,
the familiarity of customers with RM practices (that is, a demandbased pricing policy: weekdays-versus-weekends) in restaurants
was included as another covariate in the factorial ANCOVA. Last,
Beldona and Namasivayam (2006) examined gender differences
in relation to perceived price fairness and subsequent repurchase
intentions. Beldona and Namasivayam found that females perceptions of fairness were signicantly lower throughout all pricing
scenarios which framed both discount and surplus situations.
Accordingly, the model in this study incorporates gender as the
third covariate.
The survey, initiated with a brief introduction to the nature of
the study, proceeded with participants reading scenarios. The questionnaire includes two questions for perceived scarcity of capacity
and one question for perceived price difference. Second, the participants answered questions regarding their perceived value of
the restaurants expected offerings and their fairness perceptions
for the variable representing demand-based pricing policy (procedural fairness) and the price difference (distributive fairness). For
the nal portion, questions measured respondents tolerance for
crowding and familiarity with RM practices in restaurants. Demographic questions such as gender, age, ethnicity, and education
concluded the survey.
3.2. Pretest
The questionnaire underwent a pilot test, which involved 66
undergraduates in a hospitality program at a university on the east
coast of the United States. After excluding unqualied and/or inconsistent responses, 55 responses (83.3%) remained for analysis of the
pilot test. Among the respondents, 18.2% were males, and 81.8%
were females. Assessment of the scales included checks for internal consistency and unidimensionality (Traub, 1994). The average
variance extracted (AVE) for each construct was above the recommended value of .50 (Fornell and Larcker, 1981). For all constructs,
reliability was above the suggested cut-off point of .70 (Nunnally,
1978). The t-test revealed that respondents perceived price differences between weekdays and weekends for 10% vs. 40% to be
different (t-value: 5.09, p-value: .00). However, post hoc analysis shows that manipulations for perceived scarcity of capacity
did not elicit responses consistent with the hypothesis. A revised
description, The tables are always unavailable on Friday and Saturday claried the notion of perceived scarcity of capacity in the
High scarcity situation. The description of a restaurant in the
Low scarcity situation had similar revision from The tables are
sometimes unavailable on Friday and Saturday to The tables are
normally but not always available on Friday and Saturday. Another
pre-test, using the edited questions, evaluated the revised manipulations for perceived scarcity of capacity, resulting in appearance
of signicant differences in perceived scarcity of capacity among
the three scenarios.
3.3. Data collection
The nal data, collected during May 2010, represent subjects
from a general population, who requested tourism information for
Arizona, Florida, and Texas. Twelve thousand emails were divided
into twelve groups and allocated to each of the twelve scenarios.
Each respondent was asked to participate in one scenario (scarcity:
No, Low, or High; price difference: 10%, 20%, 30%, or 40%). Two
reminder emails, after 7 days and 15 days from the initial invitation,
attempted to enhance the rate of response. From the 12,000 emails,

321

Table 2
Samples demographics.

Male
Female
2029
3039
4049
5059
60 and over
US$ 20,000 or under
US$ 20,00135,000
US$ 35,00150,000
US$ 50,00175,000
US$ 75,001100,000
US$ 100,001 or more
High school or Less
Associate
Bachelors degree
Masters
Doctorate degree
Caucasian
African American
Hispanic
Asian
Other

Gender
Age

Income

Education

Ethnicity

Frequency

Percentage

119
362
27
75
119
148
112
31
42
77
102
107
104
116
105
158
84
18
419
19
8
17
20

24.7
75.3
5.6
15.6
24.7
30.8
23.3
6.7
9.1
16.6
22.0
23.1
22.5
24.1
21.8
32.8
17.5
3.7
86.7
3.9
1.7
3.5
4.1

549 respondents participated in the survey (4.6% response rate),


and the response rate for each scenario varied from 3.5% to 5.5%.
Of the 549 participants, 44 incomplete questionnaires disqualied
those responses, resulting in, 505 responses remaining for analysis
(4.2% valid response rate).
As seen in Table 2, the sample (n = 505) in the analysis represents
75.3% females (n = 362). The ages of respondents ranged from 20 to
85, with a median age of 49.3 years. Respondents aged 5059 years
old (30.8%) and 2029 years old (5.6%) accounted for the largest
and smallest proportions of respondents, respectively. In terms of
income, the respondents were fairly evenly distributed, with the
largest group (23.1%) reporting incomes between US$ 75,000 and
US$ 100,000, and with the smallest group (6.7%) reporting incomes
of US$ 20,000 or under. In terms of education, the largest category
was holders of bachelors degrees (32.8%), followed by high school
diplomas or less (24.1%). Last, 86.6% of respondents were Caucasian;
the remainder were African-American (3.9%) and of other ethnicities (3.9%).
4. Analysis and results
Manipulation checks included a series of one-way ANOVAs to
determine whether or not the experimental treatments led to the
desired signicant differences in the various conditions (results
appear in Tables 3 and 4). The study used two questions (PS1 and
PS2) to check the difference in perceived scarcity between High and
Low, and Low and No, and results of the two questions show signicant differences between both High and Low, and Low and No
(Table 3). The perceived price difference among 10% (mean: 4.10),
20% (mean: 5.04), and 30% (mean: 5.75) was also signicant, but

Table 3
Manipulation checks for perceived scarcity.
Level
PS1

PS2

High
Low
No
No
Low
High

N
173
167
165
165
167
173

Subset for alpha = .05


2
1

2.20

2.33

5.83

5.60

2.66

4.57

322

C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

Table 4
Manipulation check for perceived price difference.

PD

Level

Subset for alpha = .05


2
1

10%
20%
30%
40%

116
124
121
133

4.10

5.75
5.96

5.04

To test the six hypotheses, this study performed factorial


ANCOVA using perceived value and fairness perceptions as dependent variables. When perceived value was the dependent variable,
the main effects of both perceived scarcity of capacity (H1) and the
price difference (H3) were insignicant (Table 6). This nding indicates that neither perceived scarcity of capacity nor price difference
inuences the perceived value of restaurants offerings. In addition, the interaction effect between perceived scarcity of capacity
and price difference (H5) was insignicant. Only one of the covariates, familiarity with RM practice, was signicant (F-value: 44.90,
p-value: .00).
Table 7.
The main effect of perceived scarcity of capacity in a restaurant on fairness perceptions (H2) was insignicant, but the main
effect of the price difference (H4) was signicant (F-value: 4.54,
p-value: .01). This nding suggests that the perceived scarcity of

Note: PS1 and PS2 are two questions to check manipulation of perceived scarcity.

no perceived price difference appeared between 30% (mean: 5.75)


and 40% (mean: 5.96) (Table 4).
For all constructs, reliability was above the suggested cut-off
point of .70 (Nunnally, 1978), and the AVE for each construct was
above the recommended value of .50 (Fornell and Larcker, 1981),
as presented in Table 5.
Table 5
Reliability and unidimensionality of constructs.
Construct

Measurement items

Perceived value

Perceived fairness of price

Perceived fairness of policy

PV1
PV2
PV3
PFR1
PFR2
PFR3
PFR4
PFP1
PFP2
PFP3
PFP4

Mean

SD

4.23
3.49
3.58
2.97
3.07
3.32
3.18
3.12
3.17
3.53
3.26

1.43
1.33
1.41
1.68
1.73
1.82
1.67
1.62
1.69
1.77
1.67

Internal consistency
Cronbachs alpha

Factor analysis
Factor loading

Variance explained

.74

.91

.89

.58
.92
.92
.93
.94
.78
.89
.94
.93
.73
.88

68.0%

78.7%

76.3%

Table 6
Factorial ANCOVA results for perceived value.
Source

Type III sum of squares

df

Mean square

Sig.

Partial eta squared

Noncent. parameter

Observed powerb

Corrected model
intercept
CW
FAM *
Gender
Scarcity
Price
Scarcity Price
Error
Total
Corrected total

69.88a
43.68
2.61
49.04
2.95
2.89
3.86
2.17
328.71
4849.67
398.59

11
1
1
1
1
2
2
4
301
313
312

6.35
43.68
2.61
49.04
2.95
1.45
1.93
.54
1.09

5.82
40.00
2.39
44.90
2.70
1.33
1.77
.59

.00
.00
.12
.00
.10
.27
.17
.74

.18
.12
.01
.13
.01
.01
.01
.01

63.99
40.00
2.39
44.90
2.70
2.65
3.53
1.99

1.00
1.00
.34
1.00
.37
.29
.37
.17

Note: CW: tolerance-of-crowding; FAM: familiarity with RM.


*It indicates two-tailed signicance at 0.05 level.
a
R squared = .18 (adjusted R squared = .15).
b
Computed using alpha = 0.05.
Table 7
Factorial ANCOVA results for fairness perceptions.
Source

Type III sum of squares

df

Mean square

Sig.

Partial eta squared

Noncent. parameter

Observed powerb

Corrected model
intercept
CW
FAM*
Gender*
Scarcity
Price*
Scarcity Price
Error
Total
Corrected total

192.91a
67.92
2.92
14.40
18.26
2.93
11.78
5.44
390.63
3903.42
583.53

11
1
1
1
1
2
2
4
301
313
312

17.54
67.92
2.92
140.40
18.26
1.46
5.89
1.36
1.30

13.51
52.33
2.25
108.18
14.07
1.13
4.54
1.05

.00
.00
.14
.00
.00
.33
.01
.38

.33
.15
.01
.26
.05
.01
.03
.01

148.65
52.33
2.25
108.18
14.07
2.26
9.07
4.19

1.00
1.00
.32
1.00
.96
.25
.77
.33

Note: CW: tolerance-of-crowding; FAM: familiarity with RM.


R squared = .33 (Adjusted R squared = .31).
Computed using alpha = 0.05.
*
It indicates two-tailed signicance at 0.05 level.

C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326


Table 8
ANOVA analysis of the effects of perceived scarcity on perceived value.

perceived value, the differential for perceived scarcity of capacity


was present between Low and High scarcity situations, as shown
in Table 11.

Price difference

F-value
P
*

10%

20%

30%

40%*

1.31
.27

.20
.82

.55
.58

3.11
.05

5. Discussion

It indicates two-tailed signicance at 0.05 level.

Table 9
Post hoc analysis of the effects of perceived scarcity on perceived value for the 40%
price difference scenario.
Subset for alpha = 0.05

Low
No
High

35
35
35

3.31
3.74

3.74
3.94

Table 10
ANOVA analysis of the effects of perceived scarcity on fairness perceptions.
Price difference

F-value
P
*

10%

20%

30%*

40%

.21
.89

.67
.52

3.53
.03

.02
.98

It indicates two-tailed signicance at 0.05 level.

capacity does not inuence customers fairness perceptions toward


the restaurants RM practices, and that the price difference inuences customers fairness perceptions. Two covariates, familiarity
with RM practices (F-value: 108.18, p-value: .00) and gender (Fvalue: 14.07, p-value: .00), were found to be signicant, suggesting
that familiarity with RM practices and gender affect customers
fairness perceptions of a restaurants RM practices. No difference
appears for perceptions of difference between the 30% and 40%.
Hence, the data from the 40% scenarios were omitted from the
factorial ANCOVA. However, additional analysis including the 40%
of the price difference scenarios provided the qualitatively same
results.
This study performed one-way ANOVA to investigate whether or
not the effects of perceived scarcity of capacity on perceived value
and fairness perceptions differ for each price difference scenario.
As presented in Table 8, no signicant effects for perceived scarcity
of capacity appeared for the 10%, 20%, and 30% price differences,
but for the 40% price difference situation, the effect of perceived
scarcity of capacity on the perceived value was signicant (F-value:
3.11, p-value .05). Post hoc analysis revealed that the difference
in perceived value appeared to be between Low and High scarcity
situations (Table 9).
Table 10 shows that no signicant effects from perceived
scarcity of capacity on fairness perceptions appear for the 10%,
20%, and 40% of price differences; the effect of perceived scarcity
of capacity was signicant only for the 30% of the price difference
situation (F-value: 3.53, p-value: .03). Consistent with the result for

Table 11
Post hoc analysis of the effects of perceived scarcity on fairness perceptions for the
30% price difference scenario.
Subset for alpha = 0.05

Low
No
High

323

35
35
35

2.62
2.72

2.72
3.33

The main purpose of this study is to examine the effects of


perceived scarcity of capacity and the price difference on customers perceived value for a restaurants offerings and their
fairness perceptions regarding a restaurants RM practices. In addition, an empirical investigation considers the interaction effect of
the scarcity of capacity and price difference, proposed by Brock and
Brannon (1992). Factorial ANCOVA tested six hypotheses.
According to the commodity theory, knowledge of a products
scarcity affects consumers perceptions and evaluations of attractiveness, desirability, expensiveness, quality, and taste of a product.
However, the results of this study do not support the hypothesized
positive effect of customers perceived scarcity of capacity for a
restaurant on the perceived value of the restaurants offerings. In
addition, the equity theory proposed by Adams (1965), suggests a
positive effect of scarcity of capacity on customers fairness perceptions in the context of a restaurants RM (H2). However, this study
nds an insignicant effect.
Although the commodity theory has the support of many empirical studies, several researchers argued that the scarcity of a product
does not have a positive effect on consumers evaluations of the
product in all cases. Some studies argued that the appeal of scarcity
led consumers to scrutinize an offer more thoroughly and did not
necessarily result in favorable perceptions for the scarce product
(Brannon and Brock, 2001; Brock and Brannon, 1992; Inman et al.,
1997). Brock and Brannon (1992) argued that for scarce, negatively
valenced objects, for which an individual might have a clear aversion, the original notion of usefulness is discarded. Moreover, a
negatively valenced experience will be regarded as more aversive
to the extent that it is considered rare, because people confronting
scarcity have motivation to think about the message. Thus, scarcity
can also render negative evaluations more extreme (Brannon and
Brock, 2001).
In addition, Suri et al. (2007) examined the inuence of
perceived scarcity on consumers processing of price information
in the context of product and service purchases. The results of that
study showed that during scarcity, consumers perceptions of quality and monetary sacrice exhibit different patterns of responses
depending on the relative price level and on consumers motivations to process information. According to Suri et al., motivation
to process information moderates the effect of scarcity. During
scarcity, a high price in a high- motivation condition, increase the
perceptions of quality and value, as well as purchase intentions. In
the current study, the respondents read a scenario and imagined
participating in the situation. However, their motivation to process
given information from the scenario is unknown, perhaps explaining the results of the insignicant effects of perceived scarcity of
capacity in this study.
The unexpected insignicant effects of perceived scarcity may
also associate with the type of scarcity and the type of product. Gierl
and Huettl (2010) argued that positive effects from evaluations of
products depend on the type of scarcity (i.e., scarcity due to supply vs. scarcity due to demand) and the type of products (i.e., high
vs. low suitability for conspicuous consumption). Gierl and Huettl
(2010) combined the types of scarcity and the types of products
and found that scarcity due to supply would result in more positive
attitudes toward products than scarcity due to demand for highconspicuous consumption conditions. The ndings of the current
research support the notion that scarcity due to supply enhances
evaluations of products, but positive evaluations of the product

324

C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

decline when attributing scarcity to high demand. Thus, in the current study, customers perceptions of a dining experience at a casual
dining restaurant (whether conspicuous consumption or not) may
affect the results. If the respondents regarded having dinner at the
casual dining restaurant as conspicuous consumption, scarcity due
to high demand may not affect attitude.
Regarding the price difference factor, the current results support the negative effect of the price difference on customers
fairness perceptions regarding a restaurants RM practices. These
results suggest that as the perceived price difference between highdemand and low-demand periods increases, and customers tend to
perceive a restaurants RM practices to be unfair. However, inconsistent with the hypothesis, the results of the present study do not
support the negative effect of the price difference on customers
perceived value for a restaurants offerings.
The ndings of this study may provide restaurant managers
with some practical implications. Based on the commodity theory, a
restaurants manager may prefer a marketing message that emphasizes the restaurants full capacity during high-demand periods.
However, based on this studys ndings, such information may
not positively affect customers perceptions regarding the value
of the restaurants offerings or the fairness of the restaurants RM
practices. In such a case, the manager may instead focus on other
features or information in advertising. Based on the nding of this
study, a manager may need to avoid sharing information of available discounts that differentiate high- and low-demand periods
with customers who plan to dine or are dining during high-demand
periods because such information may discourage patronage; customers may likely form a negative perception of the restaurants RM
practices. An important issue for future research in this regard is to
discover the optimal level for price differences at which customers
will not consider the price as unfair, thus allowing restaurants to
maximize revenues.
This study performed several additional analyses and found
that for the 40% price difference scenario, the perceived scarcity
of capacity (between high and low) positively affects the perceived
value of a restaurants offerings. In other words, customers who
perceive a restaurants capacity as very scarce consider that restaurants offerings more valuable compared with the customers who
perceive a restaurants capacity as less scarce when the restaurant provides a 40% discount during weekdays. This nding may
suggest that the scarcity factor plays a signicant role only when
substantial and not marginal price differences are present between
low- and high-demand periods. A restaurant manager whose
restaurant enjoys full capacity during high-demand periods may
want to consider heavily discounting menu offerings only during low-demand periods to enhance customers perceived value of
the restaurants offerings. This suggestion arises from the notion
that when the restaurant provides a marginal discount during
low-demand periods, the restaurants high occupancy during highdemand periods (i.e., high scarcity of capacity) does not positively
affect customers perceptions of value.
From exhaustive research, this study is the rst to apply commodity and equity theories to the RM context, more specically
for the context of restaurants. Although the results do not support
the hypotheses regarding perceived scarcity of capacity, this study
raises an important issue of consumers perceptions of scarcity of
service resources in the context of restaurants RM. In addition, previous RM research has provided little investigation of the effect of
the price differences between low- and high-demand periods on
perceived value and fairness perceptions, and the current study
lls this gap in the literature. Previous RM literature also found
that familiarity with RM practice is a considerable factor for fairness perceptions of RM, and this study conrms the importance
of a respondents familiarity with RM practices in the restaurant
context.

6. Limitations and suggestions for future research


Several limitations of this study should be noted. First, given that
the respondents represent only one geographic region (i.e., U.S.),
ndings of the study may not generalize for other regions. However,
considering the representative sample of 505 respondents with a
wide range of backgrounds, as shown in prole of the sample (e.g.,
age, education, and income level) discussed in 3.3. Data Collection,
the sample may be an adequate proxy for the general restaurant
goers in the U.S. In addition, the nature of the scenarios, including
scarcity, might limit the generalizability of the results of the study,
which only analyzes the effects of scarcity in cases of no provided
information regarding other restaurants practices and alternatives.
In a scenario of choosing a restaurant, information of nearby restaurants may be a critical factor inuencing customers interpretation
of signals of scarcity.
Second, the experiment in this study is scenario-based and did
not occur in a eld setting. Online-based scenarios may not fully
represent a restaurants on-going situations in the eld. Capturing
all of the nuances of the actual situation in a scenario is difcult,
and consequently, respondents may have difculty predicting their
feelings (e.g., perceived scarcity of capacity and attitude toward
the restaurants RM practices) in a hypothetical situation. Specically, the description of the high-scarcity situation (tables always
unavailable) may not be realistic. However, after the manipulation check through the pre-test, the original manipulation for the
scarcity measure is, apparently insignicantly different among different situations. Thus, the case is intentionally extreme to ensure a
signicant difference among the scenarios. Furthermore, the main
ndings of the inuence of scarcity of capacity on value and perceptions of fairness do not appear signicant even with this extreme
case.
Third, regarding the measures for perceived value, different
aspects of value (e.g., hedonic vs. utilitarian values) may represent
extensions of this research in the future. Another constraint in this
study is the sole focus on customers perceptions of disadvantageous situations, because the hypothetical plans of respondents
were for a visit to a restaurant on a Friday. Future research may
consider examining the reactions of customers in advantageous
situations (e.g., obtaining discounts) to a restaurants RM practices
using scenarios of scarcity.
This study is experimental in nature and one of the rst few
studies to explore the effects of perceived scarcity of capacity in
the context of restaurants RM practices. Although this study did
not nd a signicant effect from scarcity on perceived value and
fairness perceptions, additional research is necessary to investigate the effects, using different settings and other factors. Future
research are encouraged to identify other factors that could inuence consumers evaluations of price information to understand
further the impact of scarcity on the valuation of service offerings
from a restaurant. In addition, future research also can examine
cognitive procession as a mediator to understand better the underlying mechanism for the effects of scarcity.
Acknowledgement
The authors would like to thank the anonymous reviewers for
their constructive comments on improving an early version of this
paper. This project is partly supported by a research grant funded
by the Hong Kong Polytechnic University.
Appendix A. APPENDIX. Sample Scenario
Imagine that you are planning to have a dinner with your
family on Friday. Your friend recommended several casual dining

C.Y. Heo et al. / International Journal of Hospitality Management 35 (2013) 316326

restaurants for you, and you found one restaurant which is located
in convenient location for you.
A.1. No scarcity 10% price difference
When you mentioned the restaurant, your friend said the tables
are always available on Friday and Saturday. You searched the
restaurants website to get additional information such as menu
offering and parking facilities. You found the restaurant provides
various menus that your family members like to have and the average check for dinner is about $30$40 per person. But you found
prices varied by day of the week, although the menus are the same.
The prices of menus during weekdays (SundayThursday) are 10%
lower than weekends (FridaySaturday)
A.2. Low scarcity 20% price difference
When you mentioned the restaurant, your friend said the tables
are normally available, but not always on Friday and Saturday.
You searched the restaurants website to get additional information such as menu offering and parking facilities. You found
the restaurant provides various menus that your family members
like to have and the average check for dinner is about $30$40
per person. But you found prices varied by day of the week,
although the menus are the same. The prices of menus during weekdays (SundayThursday) are 20% lower than weekends
(FridaySaturday)
A.3. High scarcity 30% price difference
When you mentioned the restaurant, your friend said the tables
are always unavailable on Friday and Saturday. You searched the
restaurants website to get additional information such as menu
offering and parking facilities. You found the restaurant provides
various menus that your family members like to have and the average check for dinner is about $30$40 per person. But you found
prices varied by day of the week, although the menus are the same.
The prices of menus during weekdays (SundayThursday) are 30%
lower than weekends (FridaySaturday)
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