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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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    Cited by:

    1. Belleflamme, Paul & Johnen, Johannes, 2023. "Non-Price Strategies of Marketplaces: A Survey," LIDAM Discussion Papers CORE 2023015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Jack (Peiyao) Ma & Andrea Mantovani & Carlo Reggiani & Annette Broocks & Néstor Duch-Brown, 2024. "The Price Effects of Prohibiting Price Parity Clauses: Evidence from International Hotel Groups," Economics Series Working Papers 1043, University of Oxford, Department of Economics.
    3. Mantovani, Andrea & Reggiani, Carlo & Broocks, Annette & Duch-Brown, Nestor & Ma, Peiyao, 2022. "The Price Effects of Banning Price Parity Clauses in the EU: Evidence from International Hotel Groups," TSE Working Papers 22-1371, Toulouse School of Economics (TSE).
    4. Loginova, Oksana, 2022. "Branded websites and marketplace selling: Competing during COVID-19," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 577-592.
    5. José Ignacio Heresi, 2023. "Platform Price Parity Clauses and Consumer Obfuscation," Journal of Industrial Economics, Wiley Blackwell, vol. 71(1), pages 291-322, March.

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