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Platform price parity clauses and market segmentation

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  • Joan Calzada
  • Ester Manna
  • Andrea Mantovani

Abstract

Price parity clauses (PPCs) are widely adopted by online platforms to force client sellers not to lower their prices elsewhere. We investigate under what conditions online travel agencies (OTAs) decide to apply PPCs, and how this affects hotels' listing decisions on OTAs. We find OTAs adopt PPCs when there is a sufficiently large competitive pressure in the market, either between OTAs, or between hotels (or both). PPCs allow OTAs to charge higher commission fees to hotels, which can respond by delisting from certain OTAs, thereby segmenting the market. We also find that consumers and hotels generally lose out with PPCs.

Suggested Citation

  • Joan Calzada & Ester Manna & Andrea Mantovani, 2022. "Platform price parity clauses and market segmentation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 609-637, August.
  • Handle: RePEc:bla:jemstr:v:31:y:2022:i:3:p:609-637
    DOI: 10.1111/jems.12467
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    References listed on IDEAS

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