Making Friends with Your Neighbors? Agglomeration and Tacit Collusion in The Lodging Industry
AbstractAgglomeration is a location pattern frequently observed in service industries such as hotels. This paper empirically examines whether agglomeration facilitates tacit collusion in the lodging industry using a quarterly data set of hotels in Texas. We jointly model a price and occupancy rate equation under a switching regression model to identify a collusive and noncollusive regime. The estimation results indicate that clustered hotels have a higher probability of being in the potential collusive regime than isolated properties in the same town. The identification of a collusive regime is also consistent with other factors considered to affect the sustainability of tacit collusion. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics and Statistics.
Volume (Year): 95 (2013)
Issue (Month): 3 (July)
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Other versions of this item:
- Li Gan & Manuel A. Hernandez, 2011. "Making friends with your neighbors? Agglomeration and tacit collusion in the lodging industry," NBER Working Papers 16739, National Bureau of Economic Research, Inc.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L4 - Industrial Organization - - Antitrust Issues and Policies
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
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