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Booking in the Rain. Testing the Impact of Public Information on Prices

Author

Listed:
  • Paolo Figini

    (University of Bologna)

  • Simona Cicognani

    (Leiden University)

  • Lorenzo Zirulia

    (University of Milan and ICRIOS, Bocconi University)

Abstract

Weather forecasts are a rare example of public information which is, at the same time, relevant for agents' decisions and entirely exogenous for both sides of the (tourism) market. We develop a model where signals of good weather have a positive impact on accommodation prices, the effect being stronger the higher the accuracy of the forecast and the ex-ante uncertainty in weather conditions. Using data from a sea and sun destination, we estimate an augmented hedonic price model and find that results robustly support the theory. We also find that the response of prices to weather forecasts is larger for upper-scale hotels than for low- and mid-scale hotels, a result we link to the superior pricing capability of the former.

Suggested Citation

  • Paolo Figini & Simona Cicognani & Lorenzo Zirulia, 2023. "Booking in the Rain. Testing the Impact of Public Information on Prices," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(3), pages 1329-1364, November.
    • Handle: RePEc:spr:italej:v:9:y:2023:i:3:d:10.1007_s40797-022-00199-y
    DOI: 10.1007/s40797-022-00199-y
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    More about this item

    Keywords

    Information uncertainty; Bayesian model; Pricing strategy; Hotels; Weather forecast; Hedonic price;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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