Management 64 (2018) 55e63

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Tourism Management

journal homepage: www.elsevier.com/locate/tourman

Experience economy in hospitality and tourism: Gain and loss values for and experience

Seohee Chang

Division of Culture and Tourism, Sookmyung Women's University, Seoul 04310, South Korea highlights

The hypothetical gain and loss values of service are higher than that of experience. Experience loss values are higher than experience gain values. Service loss values are lower than service gain values. The gain values differ significantly between service and experience, while the loss values did not. Experiential components-based monetary values are influenced by regional cultures. article info abstract

Article history: In the experience economy, distinct from the , industry revenue increases according to Received 13 December 2016 the extent to which consumers enjoy their experience. This study explores the experience economy from Received in revised form various viewpoints, but particularly by examining whether consumers perceive differences in the 3 August 2017 monetary values between experience and service, as well as perceive gain and loss values differently in Accepted 4 August 2017 the same experiential component. The online survey was conducted with 550 adult participants. Data were analyzed using descriptive analysis, paired t-test, and multivariate analysis (MANOVA). The findings show that consumers still tend to perceive the service industry more important than the experience Keywords: Experience economy industry. However, as the loss values of experience are found to be larger than its gain values, it is very Service economy important to convince consumers to not lose an opportunity to experience future experiential Experienced consumption. Gain values © 2017 Elsevier Ltd. All rights reserved. Loss values

1. Introduction and tourism (Kim, Ritchie, & McCormick, 2012; Loureiro, 2014; Oh, Fiore, & Jeong, 2007). However, little progress has been made, Consumers are likely to spend significantly more at particularly regarding the subjectively perceived financial values Tokyo's Aragawa steakhouse than at an outback restaurant because identified with experiences, the core of the experience economy. It they are willing to pay more at a restaurant that incorporates a is also unclear whether consumers actually perceive experiences unique theme into its offerings and service (Pizam, 2010). This is an differently from services and what they are willing to pay for example of the experience economy, in which customers tend to experiences as compared to services. pay more if they enjoy receiving additional experiential (Pine As the idea of the experience economy is derived from the & Gilmore, 1999, 2011). In the experience economy, distinct from theory of experienced utility in (Kahneman the service economy, industry revenue increases according to the & Thaler, 1991; Kahneman & Tversky, 1979; Kahneman, 2000, extent to which consumers enjoy their experience (Pine & Gilmore, 2003), research on the experience economy in the fields of hospi- 1999, 2011). Several researchers have attempted to develop di- tality and tourism need to delve into experienced utility. Most mensions and scales to assimilate Pine and Gilmore's (1999) traditional economic theories consider decision utility, whereby concept of experience into its visibility in the fields of hospitality consumers make decisions rationally to maximize the outcome utility between capital losses and gains. However, the theory of experienced utility focuses on the hedonic quality that individuals currently enjoy to explain irrational decision makers who pay E-mail address: [email protected]. http://dx.doi.org/10.1016/j.tourman.2017.08.004 0261-5177/© 2017 Elsevier Ltd. All rights reserved. 56 S. Chang / Tourism Management 64 (2018) 55e63 different amounts of money to achieve the same gain in utility generates greater revenues than the service economy and suggest (Kahneman & Thaler, 1991, 2006). To account for the underlying that pricing strategies based on the four experiential domains be decision-making mechanism of emotional decision makers, the developed. However, since the experience economy concept is theory of experienced utility argues that individuals tend to have abstract, establishing practical pricing strategies for it is difficult. different attitudes toward loss and gain for the same financial Ritchie, Tung, and Ritchie (2011) point out that research on the outcome, because the disadvantages of a potential loss loom psy- experience economy is at a very early stage. Tourism and hospitality chologically larger than the advantages of a corresponding gain studies begin by conceptualizing and developing sub-concepts and (Kahneman, 2011). items with which to adapt the concept of the experience economy Few studies have investigated the subjectively perceived (Hosany & Witham, 2010; Hwang & Lyu, 2015; Loureiro, 2014; Oh financial values identified with experiences in the experience et al., 2007). These studies operationalize experience types and economy or the ways in which consumers financially distinguish develop scales with which to examine the relationships among between experiences and services. Likewise, little research has psychological variables such as guests’ perceptions and satisfaction, been conducted on the difference between the loss and gain values but they do not investigate the experience economy per se. Pine perceived by consumers for the same financial outcome in terms of and Gilmore (2011) do not present a viable experienced utility the psychological mechanism of loss aversion. This exploratory associated with the concept of the experience economy. Moreover, study examines the financial aspect of the experience economy the experience economy estimating the financial experience values from viewpoints previous studies have not taken. The study in- does not clearly appear in the literature on tourism and hospitality. vestigates how hospitality and tourism consumers perceive the Oh et al. (2007) develop a scale based on the four experiential financial values and estimate the loss and gain values of experience domains of the experience economy suggested by Pine and Gilmore and service. Do consumers experience greater utility loss through (1999) to understand the experiential components perceived by value losses or greater utility gains through equivalent value gains, bed-and-breakfast guests. Loureiro (2014) adapts this scale to and are there differences in gain and loss utility values between examine the experiences of lodging guests, finding that the experience and service? This study also compares gain and loss perceived experiential components significantly influence values between past and future purchases. The utility of past pur- emotional attachment and loyalty (such as intention to revisit, chases comprises the financial experience and service values that recommendation, and positive word-of-mouth) to a destination, consumers wish to add to the hospitality and tourism products they mediated by arousal and memorability. Using the scale in Oh et al. have already consumed, while future purchase utility comprises (2007), other studies investigate tourist experiences in different the financial experience and service values of the hospitality and tourism contexts such as cruises (Hosany & Witham, 2010) and golf tourism products they wish to consume in the future. The study (Hwang & Lyu, 2015) to examine their relationship with other also investigates the subjectively perceived financial values of psychological variables. Hosany and Witham (2010) use educa- products, including specific intangible experiential components, tional, entertainment, esthetic, and escapist experiences to predict and the subjectively perceived financial loss when such experien- memory, arousal, overall perceived quality, satisfaction, and tial components are missing. Finally, the study examines whether intention to recommend as dependent variables, finding that subjectively perceived financial values differ according to esthetic experience explains the dependent variables better than residence. other experience types do. Hwang and Lyu (2015) indicate that educational, entertainment, and escapist experiences play an 2. Literature review important role in enhancing perceived wellbeing. Tourist experience studies are not limited to the aforemen- 2.1. The experience economy tioned. Tourist experience emerged as an important topic of study around 2000. Vittersø, Vorkinn, Vistad, and Vaagland (2000) use People tend to pursue more multisensory experience-based Csikszentmihalyi's (1975) flow state to classify tourist experiences. hedonic consumption than utilitarian consumption (Addis & Vittersø et al. (2000) define a flow state as an experienced moment, Holbrook, 2001). Pine and Gilmore (1999, 2011) argue that the but Csikszentmihalyi (1975) defines it as the optimal/peak state hedonic quality of tangible and intangible products as subjectively that occurs when experiencing a balanced moment between skills perceived by guests may lead to an increase in industry revenue. and challenges. Individuals feel bored when they have a higher Specifically, Pine and Gilmore (1999) emphasize that the experi- level of skills than the level of challenges they face and will expe- ence economy should be distinguished from the service economy, rience fear or anxiety when facing a higher level of challenge as the former stages memorable and personal experiences instead relative to their current skill level. Apathy takes over when in- of merely delivering intangible and customized services. From this dividuals have low levels of both skills and challenges, while a flow perspective, Pine and Gilmore (1999) suggest that the experience state occurs when a high level of skills meets a high level of chal- economy is based on the four experiential domains of entertain- lenges. Based on the original flow state theory, Vittersø et al.’s ment (desire to enjoy), educational (desire to learn), escapist (2000) flow-simplex mental map is simplified further into posi- (desire to go and do something), and esthetic (desire to be in a tive hedonic states (i.e., flow-related) and negative hedonic states certain place) experiences. In both guest participation and con- (i.e., flow-unrelated) to distinguish tourist experiences in the he- necting guests to events, entertainment experiences are produced donic map. Laing, Wheeler, Reeves, and Frost (2014) use a similar when guests passively participate as observers/listeners, but their framework of peak/supporting experiences to categorize tourist attention is fully occupied with the experience. Educational expe- experiences. Focusing on psychological needs and affect, Kim et al. riences are generated when guests actively participate in the per- (2012) develop the memorable tourism experience (MTE) scale, formance and fully concentrate on the experience. Escapist which comprises seven factors: hedonism, novelty, local culture, experiences occur when guests’ participation actively influences refreshment, meaningfulness, involvement, and knowledge. The the performance and their state is physically or virtually a part of MTE scale is rooted in 16 potential experiential components (e.g., what is being experienced. Esthetic experiences occur when guests hedonism, relaxation, stimulation, refreshment, adverse feelings, play a passive role as observers and feel physically or virtually a part social interaction, challenge, novelty) along with assessments of of what is being experienced. perceived value and service suggested by existing studies (e.g., Pine and Gilmore (2011) assume that the experience economy Bloch & Richins, 1983; Dunman & Mattila, 2005; Otto & Ritchie, S. Chang / Tourism Management 64 (2018) 55e63 57

1996; Ryan, 1993). spending 30 min of pleasurable time at a beach, individuals Besides the psychological approach, some researchers take a anticipated that 60 min of beach time would double their plea- philosophical approach to tourist experience. Uriely (2005) argues surable feelings, showing an overestimation of the duration and that tourist experiences reflect postmodern characteristics, intensity of happiness (Gilbert, 2006; Gilbert, Pinel, Wilson, whereby tourists interpret the meanings and values of the tangible Blumberg, & Wheatley, 1998). Hence, the theory of experienced and intangible products supplied by the industry differently and utility suggests that, as the amount of remembered utility is then deconstruct and reconstruct their experiences to create a new strongly associated with heuristic inferences and biases the amount experience in their mind. Some researchers link the postmodern of instant (present) experienced utility, it is important to objec- aspects of tourism to cyber markets or technology-based experi- tively assess hedonic utility in a moment (Kahneman, 2000). ences (Stamboulis & Skayannis, 2003; Tussyadiah, 2014). Tourist The loss aversion aspect is premised on the fact that people experience studies have been conducted in various fields, such as in psychologically enjoy gaining and dislike losing. Kahneman (2011) the hunting (Komppula & Gartner, 2013), farm (Capriello, Mason, explains this mechanism in terms of experienced utility by Davis, & Crotts, 2013), casino (Wong & Wu, 2013), food (Laing providing several examples. Individuals will choose an offer of $100 et al., 2014), shopping mall (Shim & Santos, 2014), boutique hotel with a certainty about the offer of $200 with a 50% probability even (Sørensen & Jensen, 2015), “dark” tourism (Yan, Zhang, Zhang, Lu, & though the expected result is the same because they do not like Guo, 2016), and wine cellar (Fernandes & Cruz, 2016) contexts. losing. Similarly, two employees who received two different gifts of Regarding hunting tourism, Komppula and Gartner (2013) find that equal value (extra vacation days vs. extra salary) are later allowed to one of the most important experienced values is “active together- exchange gifts, but they want to keep their gift because the sub- ness.” Wong and Wu (2013) investigate the relationship between jectively perceived values were not equal to them, since their own demographic factors and casino experience attributes, finding sig- status quo-based reference points were made with the previous nificant relationships between gender and facility and access con- gift. Traditional economic theories do not account for tastes that are venience experiences, between age and atmosphere, employee not fixed and that vary with the reference point. In other words, appearance, and brand image experiences, and between income due to status quo bias, the disadvantages of a change loom larger and employee service and facility experiences. In their study, than its advantages. Loss aversion implies that choices are strongly spending level also has a significant relationship with architecture- biased in favor of the reference situation. In another example, related experiences. In the wine cellar setting, Fernandes and Cruz people refuse to resell so-called “symbolic ” (such as wine, (2016) study experience quality as a part of service quality. Studies tickets, and mugs) to other people even at a much higher than on the tourist economy and experience economy explore the the purchased price because they think that the symbolic goods experiential attributes of tourism but not the financial values of the have unique values. A person who owns a bottle of nice wine ex- experiential components. periences more disutility from giving up the bottle than a gain of utility from the prospect of getting an equally good bottle. Similarly, 2.2. Experienced utility: loss and gain values a person evaluates a six-dollar coffee mug decorated with a uni- versity insignia to be worth more than six dollars. Kahneman Pine and Gilmore's (1999, 2011) hypothesis of increasing in- (2011) argues that such goods might be economically equivalent dustry revenue associated with increasing hedonic quality is rooted for but that the enjoyment provided by these goods is not in experienced utility in behavioral economics (Kahneman & emotionally equivalent. Thus, the subjectively estimated financial Tversky, 1979). The theory of experienced utility suggests more value associated with loss aversion is different from the objectively than just the basic assumption of human beings as emotional and estimated financial values. Therefore, there is a need to study therefore likely to pay more for hedonic pleasures (Kahneman & whether consumers perceive differences in monetary values be- Thaler, 1991; Kahneman & Tversky, 1979; Kahneman, 2000, 2003, tween experience and service as well as differences between gain 2011). Using several examples, Kahneman (2011) explains the un- and loss values in the same experiential component. Hence, the derlying mechanism of hedonic utility by focusing on the two as- following research questions are addressed in this study: pects of heuristic system and loss aversion. A heuristic system helps individuals efficiently retrieve salient RQ 1: Is there any difference between service gain values and information out of all the information stored in memory, even experience gain values? though this efficiency induces distorted memories and forecasting RQ 2: Is there any difference between service loss values and errors. For example, the pain levels experienced by two experi- experience loss values? mental groups were tested. The first group soaked their hands in RQ 3: Is there any difference between the gap in gain values comfortably warm water for 60 s and then soaked their hands in (service and experience) for past purchases and the gap in loss painfully cold water for 30 s. The second group soaked their hands values (service and experience) for future purchases? in warm water for 60 s, followed by cold water for 30 s, followed RQ 4: Do subjectively perceived financial values differ according again by warm water for 30 s. Although both groups had soaked to residence? their hands in painfully cold water for the same duration, the re- sults indicated that the latter group felt less pain. This result was 3. Method explained by the peak-end rule that violates temporal integration, according to which people remember the most recent experience 3.1. Data collection and sample more clearly. Such distorted memories lead to forecasting errors in the duration and intensity of future emotions. For example, hungry Prior to this study, a pre-study was conducted in 2015 using shoppers purchase a disproportionately large portion of food at a open-ended questions to collect data onsite regarding tangible and grocery store because they expect their current state of intense intangible hospitality and tourism products as well as the experi- hunger to last longer. However, they regret the purchase when their ential components that individuals perceive (n ¼ 100 cases). The hunger lessens. Another example of forecasting error is the lack of respondents were informed of Pine and Gilmore's (1999) concep- happiness among lottery winners, even though they anticipate tual distinction between experience consumption (i.e., consuming their future happiness to last forever (Kahneman & Thaler, 2006; memorable and personal experiences created through the mutual Kahneman, Wakker, & Sarin, 1997). In another instance, after interaction between hosts and guests) and service consumption 58 S. Chang / Tourism Management 64 (2018) 55e63

(i.e., receiving and consuming tangible or intangible benefits second part asked about the hospitality and tourism product type offered by providers) in the participation guidelines before begin- the respondents wished to consume in the future, the recom- ning the pre-study survey. Based on the findings of the pre-study mended price of the product, and the subjectively perceived loss and other studies (e.g., Gentile, Spiller, & Noci, 2007; Kim et al., values (if a service or experience that was expected from the 2012; Oh et al., 2007; Pine & Gilmore, 2011; Tung & Ritchie, product was missing). The third part asked about the subjectively 2011), tangible/intangible hospitality and tourism products and perceived financial values of the products that provide specific detailed experiential and service components were classified as intangible experiential components and the subjectively fixed categories with their definitions. To encourage a high perceived financial loss values (if the expected experiential response rate and more equally distributed demographic infor- components were missing). The following operationalization of mation, the study collected data online through the online survey service and experience was given to the survey participants before company with the largest sample of the adult population they respond to the first question: Service consumption is the (n ¼ 1,200,000) in South Korea. Participants who answered all the consumption of tangible or intangible benefits that providers offer questions were paid by the online survey company, which reduced to consumers and operates in a unidirectional way from providers missing or careless responses. Prior to data collection, pretest data to customers, whereas experience consumption is the consump- collection was conducted on 60 adults (age 20 and older) through tion of memorable moments created from the interaction be- the online survey company. Several words and guidelines were tween providers and consumers beyond the previously assigned slightly modified for clarity based on the results of the pretest. The roles of providers and customers and operates in a multidirec- online survey was conducted in 2016 with 550 adult participants tional way between providers and consumers (Pine & Gilmore, using convenient sampling, but the study attempted to make the 1999). groups similar in terms of gender, age, income, and residence The following questions were asked in the first part of the profiles in order to have an equal through the online questionnaire: survey company. Of the 550 participants, 543 responses were us- able for data analysis (seven responses were categorized as outliers “Q1: Choose all hospitality and tourism product types that you to a normal distribution). Of the 543 respondents, 50.6% (n ¼ 275) have ever consumed as a primary purpose” (multiple responses are male. The sample ranges in age from 20 to 69 years, with a mean -the options were [a] food & beverage-related (e.g., restaurants, of 35.51 years (SD ¼ 10.29). More than one-third of the sample is local food, street food), [b] accommodations-related (e.g., resort, between 20 and 29 (35.4%, n ¼ 192); the next-largest groups are 40 bed & breakfast, hotel, guesthouse), [c] nature- /sightseeing- years and over (32.6%, n ¼ 177) and 30e39 years (32%, n ¼ 174). related (e.g., mountain, national park, beach, river, farm, hot Approximately 44% of respondents report their residence to be spring), [d] historical & cultural heritage-related (e.g., heritage Seoul (43.4%, n ¼ 187), followed by Gyeonggi-do (22.8%, n ¼ 124), village, historical place), [e] festival- /event-related (e.g., local and Gyeongsang-do (20.1%, n ¼ 109). Almost half of the re- festival/event, mega event), [f] museum- /theatre- /exhibition- spondents (46.8%, n ¼ 254) indicate that their annual household /entertainment-related, [g] theme park- /zoo- /aquarium- income is between 30,000,001 and 60,000,000 Korean won (KRW). related, [h] - /religion-related (e.g., educational tour, Detailed demographic information is presented in Table 1. conference/convention, religious tour/temple stay), [i] shopping-related (e.g., shopping tourism), and [j] other-related 3.2. Instrument and data analysis products); “Q 2: Select one of the consumed hospitality and tourism The survey instrument was a self-administered questionnaire product types that remain in your memory or come up in your ” consisting of fixed choice questions and open-ended questions. mind at this moment ; “ The survey comprised three main parts. The first inquired about Q 3: Input the amount spent on the product you indicated in ” the consumed hospitality and tourism product type and the Question 2 ; “ fi subjectively perceived gain values (if a new service or experience Q 4: Input the subjectively perceived nancial value of any ” was added to the consumed hospitality and tourism product). The service components you wish to add ;

Table 1 Demographic information.

N Percent

Gender Male 275 50.6 Female 268 49.4 Total 543 100.0

Age (M:35.51, SD:10.29) 20e29 192 35.4 (20e69) 30e39 174 32.0 40þ (i.e., 40e49:21.4%, 50e59: 9.0% 60e69: 2.2%) 177 32.6 Total 543 100.0

Residence Seoul 187 34.4 Gyeonggi-do 124 22.8 Incheon, Gwangwon-do, Jeju-do 52 9.6 Gyeongsang-do (including Busan, Daeju, Ulsan) 109 20.1 Jeonra-do(including Gwangju) 29 5.3 Chungcheong-do (including Daejeon, Sejong) 42 7.7 Total 543 100.0

2015 Household Income (KRW) less than 30,000,000 124 22.8 30,000,001e60,000,000 254 46.8 60,000,001 and more 165 30.4 Total 543 100.0 S. Chang / Tourism Management 64 (2018) 55e63 59

“Q 5: Input the subjectively perceived financial value of any relationships between at least one independent variable and at experiential components you wish to add.” least one dependent variable with the assumption that there are correlations between the dependent variables. Pillai is the best The questions in the second part were as follows: statistic to use when the data violate the MANOVA assumption of varianceecovariance homogeneity or when uneven cell sizes or “Q 6: Choose one hospitality and tourism product type that you small sample sizes are involved (Hair, Anderson, Tatham, & Black, are the most eager to consume in the future”; 2003). This study investigates the relationships between six “Q 7: Input the subjectively perceived financial value you are groups (of uneven cell sizes) living in six different regions in South reasonably willing to pay for the product you indicated in Korea (the independent variables) and 20 correlated experiential Question 1”; components (the dependent variables). “Q 8: Input the subjectively perceived financial loss values if the service you expected from that product is missing”; 4. Result “Q 9: Input the subjectively perceived financial loss values if the experience you expected from that product is missing.” When asked to choose all the hospitality and tourism products they have ever purchased and experienced, most respondents The following questions were asked in the last part: (92.1%) indicated that they had purchased and experienced food and beverage-related products. However, regarding a product type “Q 10: Input the subjectively perceived financial values of that individuals purchased, remembered strongly, or that came to products, including specific intangible experiential components, mind at that moment, less than one-third of respondents (26.5%) on the assumption that the corresponding experiential domain answered food and beverage-related products, followed by is satisfactorily provided”; accommodations-related (21.7%). However, more than one-third of “Q 11: Input the subjectively perceived financial loss values if respondents (36.5%) preferred to purchase nature- /sightseeing- not satisfactorily experienced in that experiential component of related products if they had a chance to purchase hospitality and the product.” tourism products. Detailed information is presented in Table 2. Table 3 shows the descriptive analysis results of the gain and A total of 20 experiential components (Gentile et al., 2007; Kim loss values for service and experience. Individuals tended to spend et al., 2012; Oh et al., 2007; Pine & Gilmore, 1999; Tung & Ritchie, an average of 229,113 KRW on hospitality and tourism products (all 2011) were presented in order to evaluate the values of products amounts are expressed in KRW hereafter). When asked to suggest for experiencing the experiential domains of hedonism, relaxation, how much customers were willing to pay for the added service if a stimulation, refreshment, social interaction, happiness, meaning- service they wanted to receive were added to the product they had fulness, knowledge/education, challenge, unexpected happenings, purchased, the average amount of added service values was personal relevance, novelty, participation, recollection, escaping, 104,547. When asked the same question about added experiences, five senses, educational, entertainment, esthetic, and escapist. The the suggested amount was 86,355, less than that for added service. definitions of all the experiential components were provided as Regarding future purchases, individuals reported that they were well. Data were analyzed using descriptive analysis, a paired sam- willing to pay 232,342, slightly higher than the spending they re- ples t-test, and multivariate analysis (MANOVA). The descriptive ported for hospitality and tourism products in the past (229,113). analysis sought to determine the financial service and experience The respondents were asked to assess hypothetical service and values as well as the percentage gain and loss values. The paired experience loss values in future purchases. Experience loss values samples t-tests required a matched-pair sample or a repeated (M ¼ 95,079) were lower than service loss values (M ¼ 100,661). measure of one group rather than two independent groups, such as Interestingly, however, experience loss values (M ¼ 95,079) for of males and females. For this study, the respondents were those future purchases were higher than experience gain values in the individuals whose answers regarding gain and loss values for ser- previously indicated past purchases (M ¼ 86,355), whereas service vice compared with those for experience. MANOVA analyzes the loss values (M ¼ 100,661) were lower than service gain values (M ¼ 104,547). Overall, of the total past spending, service gain values accounted for 45.63%, and experience gain values accounted Table 2 for 37.69%, whereas, of total future payments, service loss values Hospitality and tourism (HT) products remaining in memory and preferred for purchase in the future. accounted for 43.32%, and experience loss values accounted for 40.92%. Past Future Table 4 depicts the results of the subjective evaluation of the HT Product Product type Product type financial values of products that have experiential components most strongly preferred for suggested by other researchers (Gentile et al., 2007; Kim et al., remaining in purchase 2012; Oh et al., 2007; Pine & Gilmore, 2011; Tung & Ritchie, memory in future 2011). The results of the respondents’ evaluation of their subjec- (One response) (One response) tive loss values for the experiential component (if they could not n Percent n Percent satisfactorily have the corresponding experiential component) are Food-/beverage-related 144 26.5 80 14.7 also shown. The financial values of the products by which the in- Accommodations-related 118 21.7 60 11.0 dividuals could experience certain experiential values ranged from Nature-/sightseeing- 92 16.9 198 36.5 36,053 (i.e., participation) to 95,036 (i.e., escapist). Of the total related financial value of a product with the corresponding experiential History-/heritage-related 46 8.5 44 8.1 Festival-/event-related 12 2.2 30 5.5 component, the percent of experience loss values (i.e., subjectively Museum-/theatre-related 53 9.8 58 10.7 perceived financial loss if the experiential domain of the product Theme park-related 53 9.8 41 7.6 was not satisfactorily experienced) ranged from 57% (esthetic) to Education-/religion-related 4 0.7 12 2.2 85% (relaxation). Shopping-related 15 2.8 17 3.1 fi Other-related 6 1.1 3 0.6 Table 5 shows the ndings concerning RQ 1 to 3. A paired- samples t-test was conducted to compare between service gain 60 S. Chang / Tourism Management 64 (2018) 55e63

Table 3 Gain and loss values for service and experience.

N ¼ 543 Min Max Mean SD (KRW) (KRW) (KRW) (KRW)

Past (Gain values) Q 3. Price of the hospitality and tourism product purchased in the past 0 6,000,000 229,113 534,353 Q 4. Amount of money willing to pay for added service (¼service gain values) 0 4,000,000 104,547 263,471 (45.63%) Q 5. Amount of money willing to pay for added experience (¼ experience gain values) 0 4,000,000 86,355 225,160 (37.69%) Future (Loss values) Q 7. Price of the hospitality and tourism product desired to be purchased in future 3,000 5,000,000 232,342 450,163 Q 8. Amount of money to be subtracted from the desired payment if expected service 0 3,000,000 100,661 244,295 is not provided (¼service loss values) (43.32%) Q 9. Amount of money to be subtracted from the desired payment if expected 0 4,000,000 95,079 257,103 experience is not provided (¼experience loss values) (40.92%)

values (M ¼ 104,547, SD ¼ 263,471) and experience gain values other locations in terms of both experiential products and loss (M ¼ 86,355, SD ¼ 25,160), t(542) ¼ 3.14, p ¼ 0.002, and between values. The following results are observed in the Bonferroni post- service loss values (M ¼ 100,661, SD ¼ 244,295) and experience loss hoc test: the mean differences between Jeonra-do residents and values (M ¼ 95,079, SD ¼ 257,103), t(542) ¼ 3.14, p ¼ 0.213. The gap residents at the other five locations (Seoul, Gyeonggi-do, Incheon/ between service gain values and experience gain values of past Gangwon-do/Jeju-do, Gyeongsang-do, Chungcheong-do) are consumption (M ¼ 18,193, SD ¼ 134,898) is significantly larger approximately 250,000 KRW in hedonism (ranging from p ¼ 0.000 (t(542) ¼ 2.14, p ¼ 0.033) than the gap between service loss values to p ¼ 0.001), followed by an average of 110,000 KRW in refresh- and experience loss values of future consumption (M ¼ 5,581, ment (ranging from p ¼ 0.002 to p ¼ 0.033), and 70,000 KRW in SD ¼ 104,240). The results suggest that service gain values are challenge (p ¼ 0.000 to p ¼ 0.035). The mean differences (MD) significantly higher than experience gain values in terms of the appear in relaxation between Jeonra-do and Seoul (MD ¼ 73,572, product already purchased, whereas the hypothetical experience p ¼ 0.029) and Jeonra-do and Chungcheong-do (MD ¼ 92,004, loss values of future consumption are higher than the hypothetical p ¼ 0.020), as well as in the stimulation between Jeonra-do and experience gain values of past consumption. Seoul (MD ¼ 56,899, p ¼ 0.047), Jeonra-do and Gyeongsang-do Table 6 shows the detailed MANOVA findings with mean values (MD ¼ 63,935, p ¼ 0.023), and Jeonra-do and Chungcheong-do by residence (RQ 4). Consumption values and patterns are closely (MD ¼ 73,669, p ¼ 0.024). For experiential loss values, hedonism related to residence because residence reflects subcultures (from MD ¼ 133,231, p ¼ 0.009 to MD ¼ 158,137, p ¼ 0.012), chal- (Schouten, Martin, & McAlexander, 2007). Residence has a signifi- lenge (from MD ¼ 53,308, p ¼ 0.002 to MD ¼ 64,012, p ¼ 0.001), cant effect on experiential product values and loss values. The post- participation (from MD ¼ 39,227, p ¼ 0.005 to MD ¼ 48,739, hoc test indicates that Jeonra-do residents tend to estimate larger p ¼ 0.000), and esthetic values (from MD ¼ 60,025, p ¼ 0.001 to financial values for experiential components than do residents in MD ¼ 74,101, p ¼ 0.001) differ significantly in their means between

Table 4 Subjectively perceived experiential values and loss value percentages.

Q 11. Subjectively perceived loss values of experiential components (%) /Q 10. Subjectively perceived values of experiential products (total 100%)

Experiential Components Min/Max Mean SD (KRW) (KRW) (%) (KRW)

1. Product to experience Hedonism (i.e., pleasurable feelings that excite oneself) 0/3,000,030 62,768 (80%) 195,771 2. Product to experience Relaxation (i.e., feeling of comfort and pleasure without involving physical activity) 0/2,000,000 50,762(85%) 133,371 3. Product to experience Stimulation (i.e., arousal of feelings that heighten and/or invigorate oneself) 0/1,000,000 38,891(76%) 91,762 4. Product to experience Refreshment (i.e., state of being refreshed) 0/1,000,000 34,589(64%) 92,117 5. Product to experience Social interaction (i.e., feeling of connection and group identity with travel partners, 0/5,000,000 47,932(77%) 238,534 family, friends, and/or local people) 6. Product to experience Happiness (i.e., feeling of joy that springs from the heart) 0/5,000,000 66,887(79%) 275,926 7. Product to experience Meaningfulness (i.e., sense of great value or significance) 0/1,000,000 45,555(69%) 115,693 8. Product to experience Knowledge/Education (i.e., information, facts, or experiences known by an individual) 0/1,000,000 39,126(65%) 93,988 9. Product to experience Challenge (i.e., experience that demands physical and/or mental ability) 0/1,000,000 27,563(63%) 67,898 10. Product to experience Unexpected happenings (i.e., unforeseeable event or situation faced with while traveling) 0/1,000,000 32,870(60%) 90,944 11. Product to experience Personal relevance (i.e., level of involvement in a tourism experience) 0/1,000,000 30,070(67%) 87,658 12. Product to experience Novelty (i.e., psychological feeling of newness resulting from having a new experience 0/2,000,000 34,786(62%) 109,638 or variety of experiences) 13. Product to experience Participation (i.e., physical involvement with the tourism experience) 0/604,004 22,912(64%) 53,654 14. Product to experience Recollection (i.e., emotions that individuals want to remember about their experience 0/2,500,000 31,425(63%) 136,979 while traveling) 15. Product to experience Escaping (i.e., relief individuals feel when away from the hustle and bustle of 0/5,000,000 54,882(65%) 243,074 their daily life) 16. Product to experience Five senses (i.e., sight, touch, taste, smell, hearing) 0/9,000,000 56,793(72%) 395,167 17. Product to provide Educational value (i.e., desire to learn) 0/1,000,000 33,500(62%) 82,784 18. Product to provide Entertainment value (i.e., desire to enjoy) 0/1,000,000 32,729(59%) 80,324 19. Product to provide Esthetic value (i.e., desire to be) 0/1,000,000 27,580(57%) 76,593 20. Product to provide Escapist value (i.e., desire to go and do something) 0/9,000,000 66,343(70%) 404,473 S. Chang / Tourism Management 64 (2018) 55e63 61

Table 5 Paired T-test results.

N ¼ 543 Q 4. Service gain values Q 5. Experience gain values 95% CI for r t (df ¼ 542) Past M SD M SD Mean Difference

Product purchased 104,547 263,471 86,355 225,160 6,821, 0.86** 3.14** 29,564

Future Q 8. Service loss values Q 9. Experience loss values 95% CI for r t (df ¼ 542) M SD M SD Mean Difference

Amount of money to be subtracted 100,661 244,295 95,079 257,103 32,06, 0.92** 1.25 14,369

Q 4. - Q 5. (Gain) Q 8. - Q 9. (Loss) 95% CI for r t (df ¼ 542) M SD M SD Mean Difference

Difference between service and experience 18,193 134,898 5,581 104,240 1,047, 0.36** 2.14* 24,175

* ¼ p < 0.05, ** ¼ p < 0.01.

Jeonra-do and the other five locations. The mean difference in consumption compared to the financial gap in service and experi- meaningfulness between Jeonra-do and Chungcheong-do ence loss values for future consumption (RQ 3), the gap in the gain (MD ¼ 84,815, p ¼ 0.035) is significantly different. In addition, values was significantly greater than was the gap in the loss values. mean differences in educational values between Jeonra-do and Finally, residence had a significant effect on experiential product Seoul (MD ¼ 54,914, p ¼ 0.013) and between Jeonra-do and values and their loss values (RQ 4). Gyeonggi-do (MD ¼ 51,289, p ¼ 0.040) appear in the findings. Specifically, many respondents purchased a variety of hospital- ity and tourism products, but they report that food and beverage- 5. Conclusion and discussion related products remain in their memory more than other prod- ucts do. This finding may be explained with reference to repeat- To sum up, concerning the hypothetical service and experience ability and basic sensory stimuli. The repeatability hypothesis is gain values in past purchases and loss values in future purchases, plausible: the frequency of food and beverage-related product experience gain and loss values were lower than were the service purchases tends to be high because this product type generally has values; however, experience showed a greater percentage of loss a high level of accessibility in terms of time, location, and afford- values than of gain values, whereas service had a greater percent- ability (Chang, Stansbie, & Rood, 2014). Such repeated exposure to age of gain values than of loss values. Regarding the financial values food and beverage-related products strengthens memory (Zajonc, of products with experiential components and their loss values, the 2001), and more recent experiences are associated with better percentage of loss values for detailed experiential components recall (Broadbent, Vines, & Broadbent, 1978). The basic sensory ranged from 57% to 85%, without reaching100% or higher (i.e., stimuli hypothesis is also plausible: eating and drinking relate to negative values). Regarding the service and experience gain values atavistic and instinctive needs, the most basic kind in Maslow's (RQ 1) and service and experience loss values (RQ 2), the gain (1943) hierarchy of needs, and experiences through such basic values differed significantly between service and experience, while sensory stimuli tend to last longer in memory (Hulten, 2011). This the loss values were not significantly different. Regarding the result also reflects the economic conditions and culture in South financial gap in the service and experience gain values for past Korea, where the data were collected. Economic conditions are

Table 6 MANOVA on residence for 20 experiential components.

Residence N Mean SD (KRW) (KRW)

Q 10. Experiential Seoul 187 53,203 71,793 product values Gyeonggi-do 124 74,686 182,062 (20 components) Incheon, Gwangwon-do, Jeju-do 52 58,323 85,044 Gyeongsang-do (including Busan, Daeju, Ulsan) 109 50,518 98,631 Jeonra-do(including Gwangju) 29 115,772 198,365 Chungcheong-do(including Daejeon, Sejong) 42 47,132 86,097 Total 543 60,932 121,513

2 Pillai's trace df F p hp 105 1.329 0.016* 0.051

Q 11. Experiential loss values Seoul 187 32,836 42,777 (20 components) Gyeonggi-do 124 60,480 189,174 Incheon, Gwangwon-do, Jeju-do 52 80,446 349,247 Gyeongsang-do (including Busan, Daeju, Ulsan) 109 34,159 74,897 Jeonra-do (including Gwangju) 29 88,111 179,009 Chungcheong-do (including Daejeon, Sejong) 42 27,297 34,179 Total 543 46,497 153,165

2 Pillai's trace df F p hp 100 1.275 0.037* 0.047

* ¼ p < 0.05. 62 S. Chang / Tourism Management 64 (2018) 55e63 objectively considered sound in South Korea, but the consumer not purchase. This result may loom larger in contexts such as fes- confidence index is poor because Koreans subjectively perceive tivals, museums, or natural environments, where experiential economic conditions unfavorably, and the number of labor hours in components may be considered more important than in restau- South Korea is higher than in other OECD countries (OECD, 2015, rants or hotels, where more structured service systems are pro- 2016). Therefore, few South Koreans can afford the time or vided to guests who may obviously perceive financial gains in such money for long vacations, unlike in Europe, although leisure time systematic services. This finding could also be supported by citing has increased in South Korea (OECD, 2015). This is why a growing examples such as sports events and operas, as illustrated by number of South Korean individuals and families are taking mini- Kahneman (2011). A ticket-holder for a sport event or opera refuses vacations, such as an overnight stay at a hotel that provides a dis- to sell the ticket to another fan who is willing to purchase it at a counted two-day package rate, including discounted dining (Yoon, very high price because of the ticket-holder's intense psychological 2017). reaction to potentially losing the intangible experiential values Although more people tended to consume easily accessible associated with the event. Indeed, when focused on the products such as food and beverage products in the past, many experience-centered products generated from a variety of experi- respondents are more likely to prefer new future experiences ential components, the loss values of experience-centered products involving nature/sightseeing. Perhaps people prefer to consume significantly increase over the aforementioned loss values for the new hospitality and tourism products even though the products are product type that the respondents would like to consume in the not easily accessible in daily life. This is consistent with the future. explanation provided in Lee and Crompton (1992) that people tend However, no consumers evaluated their loss values to be 100%, to pursue novel experiences. In particular, nature-/sightseeing- even though the main purpose of their trip was to have the cor- related products may be preferred for purchase in the future responding experiential component. Consumers likely see the because Koreans may want to relax in an uncrowded but new product as a composite of all tangible and intangible resources, not natural environment, away from the hustle and bustle. Even though just something made with intangible experiential components the product type the respondents purchased in the past is likely to (Berno & Bricker, 2001). Relaxation shows the highest loss values differ from the product type they are willing to purchase in the (85%). Koreans perceive a vacation as their main opportunity to future, there is no significant difference in payment amounts be- enjoy relaxation, as they are away from the hustle and bustle of tween the past and future products. For instance, as consumers set their work-centered lives (Ji, Lee, & Park, 2013). Korean consumers up a budget for leisure and vacations within their discretionary presumably perceive greater loss values for less relaxation than for income (Crouch et al., 2007), the expected payment amounts do not any other experiential component. drastically change, even though they may involuntarily prefer new Significant differences are observed among detailed experiential products that are more expensive than those purchased in the past. product values and their loss values according to residence (RQ 4). Regarding the findings for the research questions (1e3), the The detailed experiential components-based monetary values may average gain and loss values of service are both higher than are be influenced by regional cultures and features embedded in lo- those of experience, in contrast to previous studies’ findings on the cations rather than by residence per se. Jeonra-do residents report hypothetical gain values of the purchased product and the hypo- greater product values and loss values than do the residents of thetical loss values of the future product (Pine & Gilmore, 1999, other locations. As Jeonra-do is well-known for having many 2011). This result likely occurs because the experience economy experiential values, including cultural values such as art and food, concept is newer to consumers than is the concept of service, which this regional value may appear in the financial gain and loss values has been widely used in industry and examined by research for of experiential products. Incheon, Gangwon-do, and Jeju-do, where approximately 40 years (e.g., Lewis & Booms, 1983). The research residents perceive greater loss values than the product prices per has developed and evaluated the criteria of service quality (Lewis & se, are well-known spots for both short- and long-term vacations. Booms,1983; Parasuraman, Zeithaml, & Berry, 1985), and industries This feature encourages consumers to be more sensitive to the have charged so-called “service fees,” leading consumers to quality of the experiences enjoyed while on vacation. As consumers perceive service as a part of tangible products (Pine & Gilmore, tend to invest more of their discretionary income in vacations than 2011). Therefore, consumers believe services to be standardized in other daily leisure activities, their expectations for vacation spots and sellable, explaining this result. By contrast, experience remains are higher than for other places, and they feel greater losses if their in the personal realm. Individuals perceive that their experience is expectations are not met, as Carlson's (1956) expectancy-value personal, not something created by buying products offered by theory postulated. suppliers. This may be why industries do not charge “experience These results offer several practical implications. Industries fees.” For example, even a theme restaurant that Pine and Gilmore should not neglect the importance of consumer perceptions of the (2011) discuss imposes service charges but does not impose explicit service industry, as consumers still tend to perceive it as being experience charges for its atmosphere or design. more mainstream than the experience industry. However, as the Though service values are estimated to be higher than experi- loss values of experience are found to be greater than its gain ence values, experience loss values for future purchases are higher values, it is very important to convince consumers to take any than are experience gain values for past purchases, whereas service opportunity to experience future experiential consumption. In- loss values are lower than are service gain values. In other words, dustries should emphasize and promote the reliability of their the hypothetically lost experience values are perceived as being experiential products, particularly relaxation as an experiential higher in future consumption than the hypothetically added component. Moreover, residence is an effective factor that in- experience values in past consumption. This finding indicates that fluences the perceived financial values of detailed experiential consumer expectations of future experiences are higher than what components because residence reflects local cultures and features. they had experienced in the past because people tend to have There seems to be a need to take the regional cultures of a target higher expectations for the future and sometimes overestimate into account when creating experiential products and their future outcome (Wilson, Wheatley, Meyers, Gilbert, & Axsom, strategies. In future research, cross-country comparisons should be 2000). 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