The psychology of price discount depth: How price reductions shape vacation decision-making

Travelers increasingly encounter vacation options with highly similar final prices due to dynamic pricing and widespread promotional discounts. In such price-convergent markets, marketers often highlight original (reference) prices to signal value through discount depth. This research examines how price discount depth—the reduction from the original to the final price—influences vacation choice. Across five experiments, we show that when final prices are identical, travelers prefer options framed with larger discounts because they perceive them as more attractive. However, this effect reverses when a deeper discount is paired with a slightly higher final price than a competing alternative. These effects are driven by perceived price attractiveness rather than inferred quality. The findings advance tourism pricing research and offer practical guidance for destination marketers designing competitive promotional strategies.