Restaurant revenue management: Do perceived capacity scarcity and price differences matter?

Revenue management (RM) has become an indispensable strategic tool in capacity-constrained service industries whose total revenue often depends on the abilities of firms to use capacity efficiently. 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 flexibility of service capacity and the flexible 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 influence 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, influence the perceived value of a restaurant's offerings and the fairness perceptions of a restaurant's RM practices. As hypothesized, the negative effects of price difference on fairness perceptions are supported by the results. However, findings suggest that perceived scarcity of capacity influences neither the perceived value of a restaurant's expected offering nor the fairness perceptions for a restaurant's RM practices.