Outbound vs. domestic travel expenditure: the lens of thaler’s mental account and family utility function

Abstract

Traditional theories of consumer economy suggest that outbound tourism expenditure may inhibit domestic tourism expenditure. However, little is known about whether the effect really exists. This study applied Thaler’s Mental Accounting Theory and the Family Utility Function Model to test the relationship between domestic and outbound tourism expenditure using a sample of 1,147 Chinese travelers. The study suggests that outbound tourism expenditure has a promotional effect on domestic tourism expenditure, because: 1) the majority of Chinese travelers’ outbound tourism is still characterized by sightseeing tours with shallow experiences, and 2) unsatisfied needs and expenditures in outbound travel can promote expenditures in domestic tourism. The study makes two important theoretical contributions. First, findings of the study helped to solve the disagreement on the relationships between domestic and outbound expenditures by applying the Mental Accounting Theory. Second, it considered characteristics of both tourism products and tourists’ experiences’ influence on the allocation of travel expenditures. Given the influence of the pandemic which prohibited outbound travel, such a study is timely and has meaningful empirical implications.