Restaurant Revenue Management: Effects of Customer's Perceived Scarcity of Capacity and the Price Difference on Perceived Value and Fairness Perceptions

Abstract

Revenue management has been applied to the restaurant industry, but restaurant operators have been disinclined to apply various types of RM approaches, due to apprehension for customer's possible expressions of dissatisfaction. To relieve this reluctance, restaurant operators may need to understand how their customers perceive capacity limitations. While customers are more familiar with RM practices in traditional RM industries (e.g., airlines or hotels) with fixed capacities, perceptions of capacity limitations in restaurants (relatively flexible capacity) may influence customers' perceptions of RM practices. In addition, the price difference between high-demand periods and low-demand periods may have differential impacts on customers' perceptions of value of the restaurant's expected offering and the fairness of RM practices. Based on commodity theory and equity theory, this study hypothesizes that two main effects, perceived scarcity of space in a restaurant and price differences between high-demand and low-demand periods, influence perceived value of a restaurant's offering and fairness perceptions of a restaurant's RM practice. As hypothesized, the negative effects of price difference on fairness perceptions are supported by the results, but the effect on perceived value has support only from the results of structural equation modeling. Unexpectedly, the main effect of perceived scarcity of space does not influence either perceived value of a restaurant's expected offering or fairness perceptions for a restaurant's RM practice. Interesting results arose found from supplementary analyses and suggest future research directions.