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Can Economics Explain Where All-Inclusive Deals are Offered?

Author

Listed:
  • Bladh, Christian

    (Department of Economics, Lund University)

  • Holm, Håkan J.

    (Department of Economics, Lund University)

Abstract

This paper investigates why all-inclusive travel packages are offered at some hotels but not at others. By using the theory of transaction cost, it is argued that all-inclusive contracts mitigate a hold-up problem and that the severity of this problem varies with regards to the hotel’s distance to the resort center. This hypothesis is tested empirically against data from 3798 hotel offers and is strongly supported. Additionally, some country-specific mechanisms related to the general price level and the degree of corruption are analyzed. Countries with all inclusive offers are characterized by a low price level and high corruption.

Suggested Citation

  • Bladh, Christian & Holm, Håkan J., 2012. "Can Economics Explain Where All-Inclusive Deals are Offered?," Working Papers 2012:5, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2012_005
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    References listed on IDEAS

    as
    1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    2. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-185, March.
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    Cited by:

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    2. Melville Saayman & Andrea Saayman, 2015. "Understanding Tipping Behaviour — An Economic Perspective," Tourism Economics, , vol. 21(2), pages 247-265, April.

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    More about this item

    Keywords

    All-inclusive; contracts; hold-up; transaction cost; tourism;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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