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Price Fairness of Airline Ancillary Fees An Attrib
Price Fairness of Airline Ancillary Fees An Attrib
Price Fairness of Airline Ancillary Fees An Attrib
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Abstract
Charging airline fees has recently been a controversial issue in terms of price fairness. Nonetheless, few researchers have
studied price fairness in the tourism literature. This study aimed to examine the antecedents and consequences of tourists’
perceived price fairness of ancillary revenues. From an attributional perspective, a conceptual model was expected to
complement shortcomings of the traditional dual entitlement principle. Data were collected from U.S. domestic airline
passengers through an online survey (n = 524) and analyzed using structural equation modeling (SEM). Results suggest
that price comparison and cognitive attribution influence price fairness, which, in turn, leads to emotional response and
behavioral intentions. Results provide potentially important directions for the development of a theoretical framework of
price fairness in a tourism context. It is further expected that the findings of this study provide managerial guidance for the
utilization of marketing strategy for airline management.
Keywords
ancillary fees, attribution theory, emotional response, online survey, price fairness
(e.g., Kimes and Wirtz 2003a, 2003b). Pricing strategies to a reasonable profit based on reference profit. According to
(e.g., revenue management) in the tourism industry have this principle, a company is not allowed to increase profits
raised fairness issues, and more recently, new pricing if it violates the entitlement of a consumer, whereas, it is
schemes in the airline industry have been controversial in acceptable for a company to protect profits if the reference
terms of price fairness. Nonetheless, few tourism research- profits are threatened. Thus, Kahneman, Knetsch, and Thaler
ers have studied price fairness from a consumer perspective. (1986a, 1986b) argued that while people tend to accept price
Second, a traditional principle of price fairness (i.e., dual increases when costs increase, they would not accept price
entitlement) has been criticized in the literature for its limita- increases if costs have not increased.
tions (Vaidyanathan and Aggarwal 2003; Maxwell 2008), Despite widespread usage of the DE principle in the pric-
and some alternative or supplementary theoretical bases ing literature, Vaidyanathan and Aggarwal (2003) suggested
(e.g., attribution theory) have been suggested (Xia, Monroe, that although a DE theory argues that cost-justified price
and Cox 2004). However, these alternatives have seldom increases should be perceived as fair, this is not necessarily
been applied in the pricing literature. Thus, an understanding the case in real life. In other words, even if price increases
of the cognitive processes associated with price fairness has are cost-justified, individuals could perceive unfairness
potentially far-reaching implications for tourist behavior depending on how they understand the causes of the price
research and theory. changes. For example, when the locus of causality is internal
The main purpose of this study is to examine the anteced- to the company, price increases can be perceived as less fair.
ents and consequences of consumers’ perceived price fair- Likewise, when price increases are believed to be under the
ness of ancillary fees from an attributional perspective. That control of the company, the increases can be perceived as
is, this research aims to determine a model that predicts the less fair (Vaidyanathan and Aggarwal 2003). Maxwell
cognitive attributions influencing tourists’ price fairness and (2008) also demonstrated that customers no longer agree that
the effects of these perceptions on behavioral intentions. The increased costs of suppliers are uncontrollable but, instead,
conceptual model of this study is expected to complement they believe that cost control is a producer’s responsibility in
shortcomings of the traditional dual entitlement principle the current economic environment.
(Kahneman, Knetsch, and Thaler 1986b). Although some Some researchers (e.g., Choi and Mattila 2004; Oh 2003)
researchers have attempted to develop conceptual frame- have recently begun to examine price fairness perceptions in
works for price fairness (Xia, Monroe, and Cox 2004; Diller the hospitality and tourism literature, following the argument
2008) and have reported empirical results (Campbell 1999; that pricing practices such as revenue management are more
Kahneman, Knetsch, and Thaler 1986b; Vaidyanathan and likely to raise fairness issues (Maxwell 2008; Perdue 2002;
Aggarwal 2003), the current study is different from prior Kimes and Wirtz 2003b). For instance, Kimes and her col-
research in some aspects; examining price fairness from an leagues have applied the concept in a variety of tourism con-
attribution perspective, investigating the dimensionality of texts including hotels, cruise lines, and golf courses. In the
causal attribution, and empirically testing a conceptual context of revenue management in the golf industry, Kimes
model of price fairness. and Wirtz (2003b) found that golfers can feel mixed price
fairness perceptions toward the differential pricing, that is,
they perceive some practices (e.g., time-of-day pricing, two-
Literature Review for-one coupon program, tee time interval pricing, and
Price Fairness reservation/no-show fee) as fair, whereas they feel varying
price levels and time-of-booking pricing as unfair. It has also
Price fairness perception has been defined as “a consumer’s been found that hotel guests’ fairness perceptions are signifi-
assessment and associated emotions of whether the differ- cantly associated with variable pricing (Choi and Mattila 2004).
ence (or lack of difference) between a seller’s price and the
price of a comparative other party is reasonable, acceptable,
or justifiable” (Xia, Monroe, and Cox 2004, p. 3). In other Attributional Approach to Price Fairness
words, it is a price evaluation based on the comparison of the It has been argued that perceptions of justice/fairness are
actual price to the reference price, including previously paid fundamentally based on attribution of cause and responsibil-
price, competitors’ price, and/or other consumers’ price. ity (Cohen 1982). McCarville, Reiling, and White (1996)
Traditionally, dual entitlement has been used as a funda- suggested that attribution theory is applicable for under-
mental principle for explaining how people perceive price standing individuals’ unfairness perceptions about entrance
fairness (Kahneman, Knetsch, and Thaler 1986b; Kalapurakal, fees for a public recreation service. They further argued that
Dickson, and Urbany 1991; Kahneman, Knetsch, and Thaler Weiner’s (1980) attribution theory best fits settings where
1986a; Campbell 1999). Kahneman, Knetsch, and Thaler fees are not expected at all or where justifications for new
(1986b) postulated that a dual entitlement (DE) principle fees are not made explicit. This is because users tend to find
exists; that is, a consumer is entitled to a reasonable price reasons for the new fees, and if they are not given any justi-
based on reference transaction, and a company is also entitled fication, it can lead to negative emotional responses and
unfavorable behaviors. More recently, Xia, Monroe, and The first model, Cognitive Attribution–Emotional
Cox (2004) and Maxwell (2008) argued that attribution Response–Price Fairness (model 1), was proposed. Campbell
theory should be considered as a theoretical foundation in (2007) used a dual process of affective and cognitive
the price fairness literature. (inferred motive) modes in order to identify significant ante-
Weiner (1980) proposed the Cognitive attribution– cedents of perceived price (un)fairness. She subsequently
Emotion–Action Model (CEAM). This model explains that demonstrated that emotional response (affect) is one of the
individuals’ cognitive attributions influence their behavior critical antecedents of price (un)fairness perceptions along
through emotional responses. More specifically, when people with cognitive attribution (i.e., inferred motives). The direct
encounter certain kinds of events, they infer the cause(s) of the path from attribution to emotions has also been empirically
event, and then, depending on how the causes are attributed, tested by some researchers (e.g., Folkes, Koletsky, and
they have different kinds of emotional responses that lead to Graham 1987; Reisenzein 1986).
how they act toward the events (Weiner 1980). He argued that In the second model, price (un)fairness was hypothesized
observed actions are attributed on the basis of three dimen- to influence emotional response: Cognitive Attribution–
sions: locus of causality, controllability, and temporal stabil- Price Fairness–Emotional Response (model 2). Xia, Monroe,
ity. Locus of causality pertains to whether the cause of an and Cox (2004) conceptually suggested that price (un)fair-
action is internal or external to the actor. Vaidyanathan and ness leads to negative emotional response. They stated that
Aggarwal (2003) stated that “the locus is determined based on discrete emotions, which are correlated with dissatisfaction
who is responsible for a given action” (p. 454). Controllability (Folkes, Koletsky, and Graham 1987), vary in intensity and
refers to what extent the cause is subject to personal influence. type, depending on the type of fairness. For instance, while
Specifically, if an action was unavoidable, it is more likely to an advantage inequality is related to feelings of uneasiness or
be perceived as uncontrollable. Controllability is therefore guilt, a disadvantaged inequality may lead to disappoint-
determined by examining “if the actor could have done other- ment, anger, or outrage (Austin, McGinn, and Susmilch
wise” (Vaidyanathan and Aggarwal 2003, p. 454). Finally, 1980). The main difference in the two competing models is
stability is related to whether the cause is perceived as a tem- the location of emotions in relation to cognitive attribution
porary or permanent phenomenon. and fairness perception. Thus, the comparison of the two
Based on Weiner’s conceptualization, the following hypoth- models could be helpful in articulating the relationships
eses were proposed: between cognitive attribution, emotions, and price fairness.
As the current study results were anticipated to be consistent
Hypothesis 1: Locus of causality, controllability, with previous empirical findings, the following hypothesis
and temporal stability are explained by cognitive was proposed.
attribution.
Hypothesis 1a: Locus of causality will be positively Hypothesis 2: Model 1 will have better model fit than
associated with price fairness. model 2.
Hypothesis 1b: Controllability will be positively asso-
ciated with price fairness.
Hypothesis 1c: Temporal stability will be positively Price Comparison and Price Fairness
associated with price fairness. Research suggests that individuals make moral judgments
(i.e., perceived fairness) by making comparisons (Adams
That is, if one believes that a company charges new fees 1965). McCarville, Reiling, and White (1996) argued that
because of internal factors controllable by the company and reference price influences perceived price fairness. That is,
the new fees would be stable over time, the new price will individuals tend to expect a certain price on the basis of past
be perceived as unfair. In this study, these three concepts payment experience (internal reference price) or advertising
(locus of causality, controllability, and temporal stability) (external reference price), and they are more likely to accept
are measured as continuous variables using bipolar scales, a given price if it is consistent with previous prices. Thus,
not as dichotomous variables. This was done to determine people are not willing to tolerate a price if it violates the
the directionality and strength of the relationships between existing pricing structure (e.g., charging first-time fees for
the exogenous variables and an endogenous variable. public leisure services that were previously provided for
In addition, there are mixed findings about the fairness free). Subsequently, the hypotheses about the relationship
perception in relation to cognitive attribution and emotional between price comparisons and fairness perception were
response. While some researchers have proposed that price supported in their study, which means that people who
(un)fairness results in negative emotions (Xia, Monroe, and notice a large difference between reference price and a given
Cox 2004; Oliver and Swan 1989), some have argued that price tend to perceive unfairness (McCarville, Reiling, and
emotional response influences price (un)fairness (Campbell White 1996).
2007). Accordingly, two main competing models were pro- Accordingly, it was argued that a price comparison para-
posed to test the related hypothesis. digm plays an important role in perceptions of price fairness.
Xia, Monroe, and Cox (2004) also clarified price fairness financially and/or psychologically. They termed this self-
by proposing that “all price evaluations, including fairness protection behavior.
assessments, are comparative” (p. 1). The following hypoth- However, just complaining or switching to competitors
esis was therefore proposed: may not be sufficient to mitigate consumers’ dissatisfaction
or perceived inequity (Xia, Monroe, and Cox 2004). Especially,
Hypothesis 3: The larger the difference between refer- when a consumer feels a distinct emotion (e.g., anger and
ence price and a given price, the more one will be outrage) rather than general feelings (e.g., positive or nega-
likely to perceive the price as unfair. tive sentiment), he or she is more likely to seek revenge for a
company’s wrongdoing (Bougie, Pieters, and Zeelenberg
2003). This revenge behavior includes spreading negative
Behavioral Intentions word of mouth, taking legal actions, and reporting problems
Folkes, Koletsky, and Graham (1987) found that the to the media and/or regulatory agencies (Xia, Monroe, and
reason(s) a passenger attributes a flight delay to (e.g., due to Cox 2004). Negative word of mouth for revenge is different
bad weather or due to poor management) determines the than for self-protection in terms of its purpose: while people
passenger’s willingness to purchase the flight again. with dissatisfaction tend to spread negative words to comfort
Campbell (1999) found when individuals infer negative themselves psychologically, they purposely give their social
motives for a price increase, they are more likely to perceive network negative word of mouth to damage the company
the price increase to be unfair. Martin-Consuegra, Molina, when they experience severe emotions such as anger or fury
and Esteban (2007) argued that the more fair passengers felt (Xia, Monroe, and Cox 2004).
airfares were, the more likely they would be loyal to the The following hypotheses were thus proposed:
airlines. Martin, Ponder, and Lueg (2009) also found that
justified reasons for price increases could actually increase Hypothesis 4: Price fairness perception influences
loyalty. behavioral intentions.
In addition, perceived price fairness has been considered Hypothesis 4a: Price fairness perception positively
as an important antecedent of willingness to pay (WTP) influences behavioral loyalty.
(Schröder and Mieg 2008; Ajzen, Rosenthal, and Brown Hypothesis 4b: Price fairness perception positively
2000; Mitchell and Carson 1989). McCarville, Reiling, and influences willingness to pay more.
White (1996) argued that perceptions of unfairness of user Hypothesis 4c: Price fairness perception negatively
fees can evoke hostility and displacement for public recre- influences complaining behavior.
ation services. Ajzen, Rosenthal, and Brown (2000) also Hypothesis 4d: Price fairness perception negatively
found that the perceived fairness of requested payments to influences revenge behavior.
public goods or services is positively related to WTP. More
recently, Schröder and Mieg (2008) argued that perceived Consequently, the following model was proposed (Figure 1).
fairness significantly predicts WTP. That is, when individu- Price fairness was applied to the attribution model (cognitive
als are asked what amount of money they would be willing attribution–emotional responses–behavioral intentions) in a
to pay for a public good, their response may depend on their behavioral price context.
perception of justice or fairness (i.e., should I pay for it, or
should someone else pay for it more than what I ought to
pay?) (Chung, Kyle, Petrick, and Absher, 2011). Method
With reference to the relationship between price fairness The target population for the current study was leisure tour-
and unfavorable behavioral intentions, Xia, Monroe, and ists who had taken domestic flights in the United States.
Cox (2004) proposed that perceived price (un)fairness can Because it was not possible to obtain a passenger list, a panel
lead to actions including the following: no action, self- list provided by an online survey institution was used as an
protection, and revenge. When buyers feel perceived inequal- alternative sampling frame. Specifically, a survey instru-
ity of prices, they cannot act, or act to protect themselves ment was e-mailed to panelists who voluntarily registered to
financially and/or psychologically. Moreover, they could participate in online surveys. Although several researchers
seek revenge by trying to get back at the company(s) (Bougie, have expressed concerns about the potential for sampling
Pieters, and Zeelenberg 2003). Therefore, Xia, Monroe, and bias (Dillman, Smyth, and Christian 2009), recent empirical
Cox (2004) conceptualized that depending on the extent one studies have revealed only minor differences between the
feels price unfairness and the degree of the negative emo- results of online panel surveys and conventional survey
tions, two types of unfavorable behavioral intentions (i.e., methods (e.g., telephone and face-to-face). In addition,
self-protection and revenge) could be observed. They argued online panels have some advantages, including speed, costs,
that consumers complain, spread negative word of mouth, large sampling size, and selective samples by sociodemo-
and switch to other competitors in order to protect themselves graphic attributes (Hung and Law 2011). Technical mechanisms
Price
comparison Behavioral
H3 H4a Loyalty
Locus of
Causality H1a
H4b Willingness
H1b
Cognitive Price To Pay more
Controllability
attribution fairness H4c
H2
Temporal H1c Complaining
Stability H4d
Emotional
response Revenge
in this method can also prevent respondents from giving Petrick, and Crompton 2007; Herrmann et al. 2007;
missing values. The economic benefits and convenience Campbell 1999).
therefore make this method increasingly common for mar- In line with the SEM (structural equation modeling)
keting research (Dillman, Smyth, and Christian 2009; Duffy, sequential data analysis (Diamantopoulos and Siguaw 2000),
Smith, Terhanian, and Bremer, 2005). the hypothesized model was tested in order to achieve four
In particular, this study made efforts to address coverage specific objectives of the study: (1) to determine which
error issues: to fill the gaps between online panels and the dimensions of attribution are best at predicting price fair-
general population. The invitations to the survey (20,700 ness, (2) to examine the role of emotional response in rela-
e-mail invitations) were sent to mirror the U.S. Census popu- tion to price fairness, (3) to examine the role of price
lation parameters of age, gender, and household income comparison as a predictor of price fairness, and (4) to deter-
(MarketTools 2010). Thus, arguably, the outbound invita- mine which dimensions of price fairness are best at predict-
tions were weighted toward the U.S. Census population in ing behavioral intentions.
terms of age, gender, and household income. In addition to
these three profiles, only respondents who were qualified for
this study (i.e., had experiences on domestic leisure flights in Results
the past 12 months) were invited to participate in the survey. Descriptive Findings
After the survey instrument was updated from the pilot sur-
vey (n = 107) (e.g., modified items for causal attribution, Among a total of 1,358 responses, those who had not taken
rephrased wording to fit the context of flights trip), the main any domestic flights in the past 12 months for leisure travel
survey was conducted from April 15 to April 22, 2010. and those who failed to complete the survey were excluded
The measurement items for each variable were adapted from data analysis. Subsequently, 524 valid responses were
from previous research, and were somewhat modified to used in this study. The sample was slightly dominated by
best fit the study context. Regarding price comparison, four female respondents (58.0%). The average age of the respon-
items were drawn from previous studies (Xia, Monroe, and dents was 47.8. More than one-third of the respondents
Cox 2004; Bolton, Warlop, and Alba 2003). The items for (36%) were 55 and older, while only 26% of the respondents
cognitive attribution were adapted from the attribution the- were aged 18-34. In addition, almost one-third of respon-
ory literature: the Causal Dimension Scale (CDS I and II; dents (29.4%) fell into the annual household income cate-
Russell 1982; McAuley, Duncan, and Russell 1992) and the gory of $100,000 and more, while only 7.1% earned less
Attributional Style Questionnaire (ASQ; Peterson et al. than $25,000 annually. The median household income was
1982). Emotional response was measured with multiple $50,000 to $74,999. It was also found that while a majority
items that have been frequently used in related contexts of respondents (57.1%) currently have some college or had
(Folkes, Koletsky, and Graham 1987), and price fairness a college degree, only 11.3% completed high school or
with valid and reliable scales from the marketing and tour- less. In terms of ethnicity, the vast majority of respondents
ism literatures (Petrick 2002; Martin, Ponder, and Lueg (83.0%) were Caucasian. The weighted sample invitation
2009). Some items were also adapted to measure behav- process showed that the respondents have a little bit higher
ioral intentions (Grewal, Monroe, and Krishnan 1998; Lee, level of household income than the general online panel,
whereas at a glance, there are no significant differences in indices in confirmatory factor analysis (CFA) suggested that
gender and age between the two groups. one of the items regarding controllability (con3) should be
excluded because of insignificant factor loadings, and that
some error terms (i.e., err4 ↔ er5 and err 1↔ err3) should be
Normality correlated. In the end, the final version of the second modifi-
Since SEM with maximum likelihood (ML) estimation cation model also represented a good fit to the data,
assumes multivariate normality and continuously measured χ2(df) = 13.526(3), p = .004; RMSEA = .082; CFI = .994;
variables, it was necessary to examine whether or not the NNFI = .982.
data set was normal. West, Finch, and Curran (1995) argued However, the first model (ATT-1) may raise a discrimi-
that nonnormality in SEM may yield an inflation of the nant validity issue because of the high level of correlation
χ2 value, underestimation of fit indices (e.g., Tucker-Lewis (.749) between the locus of causality and controllability. The
index [TLI], comparative fit index [CFI]), and underestima- CFA in AMOS also confirmed high correlation between the
tion of standard errors. Byrne (2009) also demonstrated that two dimensions (.844). Furthermore, exploratory factor
ML estimation using nonnormal data leads to larger chi- analysis (EFA) using oblique rotation methods demonstrated
square values, lower CFIs, higher root mean square error of that cognitive attribution had only one dimension collapsing
approximation (RMSEA), and lower standard errors than causality and controllability (Kaiser-Meyer-Olkin [KMO]
robust ML estimation using Satorra-Bentler adjusted chi- measure = .878; Bartlett’s test = 2225.668, p < .001). As
square value. In this study, two multivariate normality tests reviewed earlier, some researchers have proposed one
(Mahalanobis distances and Mardia’s statistic) showed that dimension of cognitive attribution (positive vs. negative
some multivariate outliers existed in the data set (Tabachnick inferred motive) and have found some empirical evidence
and Fidell 2007; Pallant 2005; Mardia 1970). supporting this (e.g., Campbell 2007). The model ATT-2
This study therefore used the bootstrapping to deal with (i.e., one dimension of cognitive attribution) was therefore
multivariate nonnormal data, which is arguably the most chosen for data analysis in this study. In summary, hypothe-
often used method for overcoming nonnormal data in SEM. sis 1 was not supported, and inevitably the subhypotheses
Bootstrapping is a statistical resampling method by which (hypotheses 1a, 1b, and 1c) could not be tested.
the original sample is considered to represent the population
(Kline 2005; Byrne 2009). Thus, it allows a researcher to
measure parameter estimates with a greater degree of accu- Measurement Model
racy, particularly, for moderately large samples indicating To test the following hypotheses regarding the antecedents
multivariate nonnormality (Byrne 2009; West, Finch, and and consequences of price fairness, a two-step approach to
Curran 1995). SEM was used to examine the full proposed model in this
study (Anderson and Gerbing 1988); that is, a measure-
ment model encompassing all latent variables was first
Testing Dimensionality of Attribution tested, and then the structural model was analyzed. In this
A preliminary data analysis and the pilot study warned that study, 8 latent variables and 32 observed variables were
there may be some problems in the dimension of temporal included in the initial measurement model. The subsequent
stability (i.e., Cronbach’s alpha = .459). The composite reli- goodness of model fit suggested that the model should be
ability of the temporal stability also turned out to be very respecified according to the modification indices (Byrne
poor (.02). Therefore, temporal stability was not included in 2009; Kline 2005).
this study. In addition, a reduction of cognitive attribution However, before modification indices were examined,
dimensions could be accepted because (1) there are inconsis- the results of the preliminary analyses led to a further exami-
tent conceptualizations and empirical findings about the nation of the relationships between REV (Revenge) and
dimensionality of cognitive attribution (e.g., one, two, COM (Complaining) variables. Some factor loadings for the
and three dimensions) (Bitner 1990; Campbell 1999; REV and COM variables were below .50, suggesting possi-
Vaidyanathan and Aggarwal 2003; Weiner 1980) and ble correlations between the measurement errors of COM
(2) this study is exploratory in applying attribution theory in and REV. Also, a relatively high (.758) correlation was
a price fairness setting. found between REV and COM.
Accordingly, alternative models were proposed. The first EFA using principal axis factoring method with an
proposed model (model ATT-1) was a two first-order model oblique rotation showed that COM included five items (rev5,
with two dimensions locus of causality and controllability. rev4, com2, com3, and com1), and REV included three items
This model represented a good fit to the data, χ2(df) = (rev3, rev2, and rev1). Although Cronbach’s alpha indicated
31.018(8), p < .001; RMSEA = .074; CFI = .990; nonnormed acceptable levels of reliability for the two latent variables
fit index (NNFI) = .981. The other model (model ATT-2) (COM = .863 and REV = .781, respectively), an item of
was one first-order model with all six items related to com1 indicated a lower level of factor loading (.43) than a
causality and controllability. A review of the modification criterion (≥.50). Thus, the exclusion of com1 and movement
of two items (rev4 and rev5) from REV to COM were rec- Structural Model
ommended. The relocation of the two items was also justi-
fied by examination of the scales. The rev 4, “I will report Two structural models were specified as the nature of
(reported) the airfares and/or extra fees from my most recent hypothesis 2 was to compare two models. A review of model
trip to the media,” and rev5, “I will report (reported) the air- fit indices demonstrated that although the two models were
fares and/or extra fees from my most recent trip to legal and within the recommended range of acceptability, model 2
regulatory agencies,” items were related to complaining represented a better fit to the data: χ2(df) = 1424.917(445),
about the unfair experiences to external agencies or the p < .001; RMSEA = .065; TLI (NNFI) = .915; CFI = .924.
media. Although Xia, Monroe, and Cox (2004) argued that Since model 2 presented better model fit indices, hypothesis
reports to the media or legal agencies belong to revenge 2 was not supported.
behavior for the purpose of damaging sellers, it could Accordingly, model 2 was used for testing the subsequent
be argued that this reporting behavior is perceived as more hypotheses. As the sequential process of modification shows
closely related to complaining behavior than deliberate in Table 3, three paths showing relationships between a pair
revenge behavior. of latent variables in the initial model were excluded: from
In addition to the removal of the item and relocation of EMO to WTP; from PF to REV; and from PF to COM. The
the two items, measurement errors (i.e., err33 ↔ err34, err20 paths showed statistically insignificant (p > .05) regression
↔ err21, and err23 ↔ err24) were allowed to be correlated. coefficients: β = –.005 (p = .931), β = –.099 (p = .084), and
These measurement error covariances might result from sys- β = –.089 (p = .059), respectively.
tematic measurement error in item responses, which derive Although the paths were specified based on the theoretical
from characteristics specific either to the items or to the reasoning, the deletion of the paths was still justifiable because
respondents (e.g., two or more questions, although worded the variables were indirectly connected to the corresponding
differently, essentially ask the same question in a question- variables through mediators. That is, emotional response
naire) (Aish and Joreskog 1990). Consequently, good model influenced willingness to pay more through behavioral loy-
fit indices of the modified measurement model were obtained, alty, price fairness influenced revenge behavior and complain-
χ2(df) = 976.217(429), p < .001; RMSEA = .049; TLI (NNFI) = ing through emotional response. These results suggest full
.951; CFI = .957. mediating relationships between each pair of variables.
In the end, a revised model 2 was specified to represent a
good fit to the data: CFI = .95; NNFI = .94; RMSEA = .05.
Reliability and Validity Note that the chi-square (χ2 = 1120.947, df = 445) was not
Composite reliability indicated that all factors had accept- considered a critical indicator of a model fit as it tends to be
able reliability levels (≥.60) except the cognitive attribu- very sensitive to large samples (Kline 2005; Hair et al. 2006).
tion (.45) (Table 1). However, although the composite The path coefficients were all statistically significant (Table 4).
reliability of this variable was marginally low, the Price comparison negatively influenced price fairness
Cronbach’s alpha for this was .917. The item–total correla- (β = –.204, p < .001), and price fairness positively influenced
tions and interitem correlations also ranged within .75 and behavioral loyalty and willingness to pay more (β = .431,
.83. Thus, it was argued that this variable moderately p < .001; β = .225, p < .001, respectively). These results sup-
showed internal consistency. ported hypotheses 3, 4a, and 4b.
In addition to reliability, convergent and discriminant On the other hand, there was no evidence supporting
validity were assessed. It shows that all average variances hypotheses 4c and 4d because the direct paths between price
extracted (AVEs) are greater than .45, suggesting that the fairness and complaining/revenge behavior were deleted
model has convergent validity (Table 2). because of being statistically insignificant. Thus, hypotheses
To ensure discriminant validity, the correlations between 4c and 4d were not supported. Alternatively, an examination of
variables were compared to the squared correlations the relationships via a mediator (emotional response) demon-
between the two variables (Hatcher 1994). All AVEs in this strated that there was negative relationship between price fair-
model were greater than the corresponding squared correla- ness and the two dependent variables. Price fairness was found
tions except the variable of WTP. AVE of WTP (.62) is to negatively influence emotional response (β = –.520, p < .001),
slightly lower than the squared correlation between WTP which in turn positively influenced revenge behavior (β = .402,
and LOY (.65). The high correlation between WTP and p < .001) and complaining behavior (β = .408, p < .001),
LOY (.81) is understandable as the two constructs seem respectively. While the hypotheses cannot be supported, it is
conceptually similar, though the literature consistently has acknowledged that the variables are related, but not directly.
suggested they are unique constructs (Zeithaml, Berry,
and Parasuraman 1996; Baker and Crompton 2000; Lee,
Petrick, and Crompton 2007). Other than this almost Discussion and Conclusions
expected violation, discriminant validity was satisfactory This study sought to gain an understanding of the relation-
in this model. ships between antecedents and consequences of tourists’
perceived price fairness. Overall, the proposed model fit the price comparison negatively influenced price fairness, cog-
data well from a global perspective; nevertheless, some nitive attribution positively influenced price fairness. If
hypotheses were not supported and a revised model was individuals evaluated the price (e.g., extra fees) to be much
proposed. The hypothesis testing demonstrated that while higher than expected, they perceived the price to be unfair.
Also, it was found that passengers perceived airlines’ extra to judge the price increase fair than unfair. In other words,
fees to be unacceptable and unjustifiable and were more fairness or unfairness judgments rely on buyers’ subjective
likely to be angry and feel distress when they thought the perceptions based on cognitive reasoning.
fees were higher than appropriate prices. However, if peo- Price fairness was further found to influence behavioral
ple inferred that price changes were caused by something intentions. People who felt that the fees were fair were more
uncontrollable and situational factors, they were more likely likely to spread positive word of mouth and recommend the
consistently been found to be related to perceived price. An have done our best efforts to protect against price increases,
examination of price fairness is particularly important in a but, inevitably, we have to start charging checked-bag fees
travel and tourism context since a variety of pricing practices because of the oil price increase. The heavier we are, the
(e.g., yield management, dynamic pricing, and ancillary rev- more we need fuel.” This concise message may sound more
enues) have increasingly raised fairness issues (Perdue clear and comprehensible, and could be an efficient way to
2002). The fairness judgment in a pricing context can be a deliver marketing communications.
driver of emotions and/or satisfaction, which can also influ- Finally, this study suggests that it is important to cope
ence future behavioral intentions and purchase decisions with consumers who already feel price unfairness because
(Oliver and Swan 1989). Thus, this research is believed to unfairness judgments tend to evoke negative emotions that
build on the theoretical discourse in the tourism pricing can consequently lead to unfavorable behavioral intentions.
literature. For airline management, several ways of handling angry pas-
Results also offer insight into practical implications for sengers can be proposed in order to protect against potential
airline management in terms of marketing communications negative behaviors. This proactive consumer relationship
and customer relationships. Results showed that depending management is required rather than reactive consumer rela-
on how passengers understand the reasons for price increases tionship management because it can anticipate concerns
or new prices, they may or may not feel the extra fees as fair. before they become serious problems. More specifically,
Thus, airline management needs to consider remedies as to front-line employees need to be empowered to handle angry
how they can persuade passengers. For example, giving the customers immediately and fairly because passengers or pro-
right justification (e.g., this price change is uncontrollable) spective passengers are most likely to show the front-line
to customers in a timely manner can be considered as one staff their negative reactions. Thus, giving justifiable expla-
tool for successful marketing communications. This is also nations to passengers in a timely manner could be effective,
supported by previous research that has demonstrated that and alternative ways to resolve these concerns could be an
reasons or justifications for an act could cause the outcome efficient way of dealing with angry customers. For example,
to be perceived as more fair than when justification is not a loyalty program or credit card membership (e.g., frequently
offered (Bies and Shapiro 1988; Greenberg 1990). flyer membership) could be introduced to the customers in
Recently, many airlines in America and Europe have order to have the extra fees waived. US Airways actually
begun charging extra fees for services that used to be free. promotes this strategy: passengers who complain about
They have introduced new fees for other reasons. For the extra fees could be encouraged to register for airline
instance, some airlines have insisted that charges for carry- frequent-flyer membership to get the benefits they deserve.
on bags would ultimately benefit customers because passen- In addition, this study showed that angry passengers are
gers might want to bring fewer bags to avoid the fees, which more likely to report their negative experiences to external
could speed up check-in (CNN 2010). Some airlines have agencies and media as well as the airlines. Thus, it is sug-
stated that fewer bags and services due to the extra fees help gested that airline management consistently monitor external
cut handling costs, which are ultimately used to cut airfares agencies and media (e.g., websites and reviews). For exam-
(Economist 2006). However, it appears that although those ple, management can set up an online reputation manage-
justifications could be very persuasive to some segments, ment department to regularly check out any negative
they might not be to others (e.g., business travelers may be feedback and complaints on the Internet.
supportive for that, while leisure travelers with some carry- In spite of its many advantages, data collection using
on bags and checked-in bags would likely not be). online panels is not flawless. One of the frequently cited
Accordingly, a marketing strategy in line with the price fair- issues is that online panels are a voluntarily registered group
ness model of this study could be considered (e.g., having of people instead of randomly selected individuals (Dillman,
passengers attribute the extra charges to some external Smyth, and Christian 2009). Therefore, it is almost impossi-
uncontrollable reasons such as falling traffic and surges in ble to calculate the probability of being selected from a sta-
fuel costs). tistical perspective. In addition, the low response rate
Results also suggest that airline management should inherent in online panel studies is certainly a limitation.
understand how passengers form their cognitive attributions Nonetheless, this study recruited online panelists because
in an extra fees context. This study found that cognitive attri- of several benefits (Hung and Law 2011). For instance, the
bution is a unidimensional concept encompassing locus of sample could be drawn from more general population across
causality and controllability. This means that a complicated the country than an intercept on-site survey at an airport. In
explanation for the causes of the fees reflecting all three addition, it is most likely understandable to argue that there
dimensions (as the traditional attribution theory has sug- are some differences in price fairness between diverse cul-
gested) may not be efficient. Instead, this study suggests that tural contexts. For instance, it has been found that in some
airline management needs to give justification of extra fees cultures, people are more likely to blame others for failures,
by focusing only on who is responsible for the fees. For but in other cultures, they tend to blame other external
example, a message like this one could be considered: “We factors (e.g., fate or luck) for failures (Maxwell 2008;
Kelley 1973). Therefore, it is suggested that the revised Byrne, Barbara M. (2009). Structural Equation Modeling with
model in this study be applied to other cultures (i.e., Europe AMOS: Basic Concepts, Applications, and Programming. 2nd
or Asia). ed. Multivariate Applications Series. New York: Routledge.
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Declaration of Conflicting Interests ness: Antecedents and Consequences.” Journal of Marketing
The authors declared no potential conflicts of interest with Research, 36 (2): 187-99.
respect to the research, authorship, and/or publication of this Campbell, Margaret C. (2007). “‘Says Who?!’ How the Source of
article. Price Information and Affect Influence Perceived Price (Un)
fairness.” Journal of Marketing Research, XLIV (May): 261-71.
Funding Choi, Sunmee, and A. S. Mattila. (2004). “Hotel Revenue Manage-
The authors disclosed receipt of the following financial support for ment and Its Impact on Customers’ Perceptions of Fairness.”
the research, authorship, and/or publication of this article: This Journal of Revenue and Pricing Management, 2 (4): 303-14.
work was supported by the Holland America Line-Westours Chung, Jin Young, Gerard T. Kyle, James F. Petrick, and
Graduate Research Grant. James D. Absher. (2011). “Fairness of Prices, User Fee Policy
and Willingness to Pay among Visitors to a National Forest.”
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