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Third-degree price discrimination in a short-stay accommodation industry

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  • Ann Marsden
  • Hugh Sibly

Abstract

This article analyses the pricing in the short-stay accommodation industry in Tasmania. It utilizes a novel 2008 survey of Tasmanian short-stay accommodation firms in which business managers were asked about their perception of the elasticity of their firm’s demand in each of the market segments that their firm supplied. This direct observation of elasticity allows us to demonstrate that firms’ price across market segments act in a manner consistent with the Lerner index and the theory of third-degree price discrimination. Further we show, in line with expectations based on the literature, that increased quality of the accommodation lowers the elasticity of demand, while the elasticity of demand is higher in winter. Surprisingly, Internet sales channels do not exhibit a different elasticity of demand to other sales channels.

Suggested Citation

  • Ann Marsden & Hugh Sibly, 2017. "Third-degree price discrimination in a short-stay accommodation industry," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5166-5182, November.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:51:p:5166-5182
    DOI: 10.1080/00036846.2017.1302063
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    References listed on IDEAS

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    1. Jan Gertheiss & Gerhard Tutz, 2009. "Penalized Regression with Ordinal Predictors," International Statistical Review, International Statistical Institute, vol. 77(3), pages 345-365, December.
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    Cited by:

    1. Martin Petricek & Stepan Chalupa & Karel Chadt, 2020. "Identification of Consumer Behavior Based on Price Elasticity: A Case Study of the Prague Market of Accommodation Services," Sustainability, MDPI, vol. 12(22), pages 1-14, November.

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