Making Friends with Your Neighbors? Agglomeration and Tacit Collusion in The Lodging Industry
Agglomeration is a location pattern frequently observed in service industries such as hotels. This paper empirically examines whether agglomeration facilitates tacit collusion in the lodging industry using a quarterly data set of hotels in Texas. We jointly model a price and occupancy rate equation under a switching regression model to identify a collusive and noncollusive regime. The estimation results indicate that clustered hotels have a higher probability of being in the potential collusive regime than isolated properties in the same town. The identification of a collusive regime is also consistent with other factors considered to affect the sustainability of tacit collusion. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 95 (2013)
Issue (Month): 3 (July)
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