Advertising, Price and Hotel Service Quality: A Signalling Perspective

Hsien-Hung Chiu and Chiang-Ming Chen

Tourism Economics, 2014, vol. 20, issue 5, 1013-1025

Abstract: This study investigates two main issues: the relationship between advertising expenditure and service quality, and the relationship between price and service quality in the hotel industry. The authors consider an asymmetric-information environment, in which consumers are uncertain about service quality, and address the above issues from a signalling perspective. Building on signalling and counter-signalling theory in economics, the authors propose a number of testable hypotheses and conduct an empirical study using data for Taiwanese international tourist hotels. The empirical results support the hypothesis that the advertising–quality relationship is inverted-U shaped, whereas the price–quality relationship is positive and monotonic. Hence, higher prices may signal higher service quality, whereas higher advertising expenditure does not necessarily signal higher service quality.

Keywords: quality signalling; counter-signalling; service quality; advertising strategy; pricing strategy (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:20:y:2014:i:5:p:1013-1025

DOI: 10.5367/te.2013.0324

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