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Markets: The U.S. Lodging Industry

  • Arturs Kalnins
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    The U.S. lodging industry appears highly competitive. Ownership concentration appears to be low. Fixed costs are high relative to variable costs and unused rooms cannot be stored for future sale, so price-cutting should be attractive. However, this paper argues that, unexpectedly, oligopolistic market structures in many local lodging markets, combined with behavioral norms of cooperation, sustain profits in what might otherwise be an industry of cutthroat competition. I describe the patterns of competition and cooperation in the U.S. lodging industry, summarizing theoretical arguments, empirical research, descriptive statistics from industry and government sources, and anecdotal evidence from the trade press and from interviews conducted with managers of over 200 properties nationwide.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.20.4.203
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    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 20 (2006)
    Issue (Month): 4 (Fall)
    Pages: 203-218

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    Handle: RePEc:aea:jecper:v:20:y:2006:i:4:p:203-218
    Note: DOI: 10.1257/jep.20.4.203
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    14. Michael J. Mazzeo, 2002. "Product Choice and Oligopoly Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 221-242, Summer.
    15. Michael Conlin & Vrinda Kadiyali, 2006. "Entry-Deterring Capacity in the Texas Lodging Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 167-185, 03.
    16. Jean-Pierre Ponssard, 1979. "The Strategic Role of Information on the Demand Function in an Oligopolistic Market," Management Science, INFORMS, vol. 25(3), pages 243-250, March.
    17. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
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