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Making Friends with Your Neighbors? Agglomeration and Tacit Collusion in The Lodging Industry

Author

Listed:
  • Li Gan

    (Texas A&M University and NBER)

  • Manuel A. Hernandez

    (IFPRI)

Abstract

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.

Suggested Citation

  • Li Gan & Manuel A. Hernandez, 2013. "Making Friends with Your Neighbors? Agglomeration and Tacit Collusion in The Lodging Industry," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 1002-1017, July.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:3:p:1002-1017
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    Cited by:

    1. Gan, Li & Hernandez, Manuel A. & Zhang, Shuoxun, 2021. "Insurance or deliberate use of the bankruptcy law for financial gain? Testing for heterogeneous filing behaviors in the United States," Economic Modelling, Elsevier, vol. 105(C).
    2. Augusto Voltes-Dorta & Federico Inchausti-Sintes, 2021. "The spatial and quality dimensions of Airbnb markets," Tourism Economics, , vol. 27(4), pages 688-702, June.
    3. Cappenberg, Christina, 2013. "Staatliche Förderung regionaler Unternehmensnetzwerke: Legitimation nationaler Clusterpolitik," Arbeitspapiere 140, University of Münster, Institute for Cooperatives.
    4. Ibrahim Mohammed & Basak Denizci Guillet & Rob Law, 2019. "Modeling dynamic price dispersion of hotel rooms in a spatially agglomerated tourism city for weekend and midweek stays," Tourism Economics, , vol. 25(8), pages 1245-1264, December.
    5. Ashintya Damayati & Chaikal Nuryakin & Muhammad Halley Yudhistira & Teguh Dartanto, 2024. "Industrial location policy, exporting activity, and firms’ collusive behavior: scrutinizing the unintended effect of industrial location policy in Indonesia," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 51(4), pages 815-858, December.
    6. Melis, Giuseppe & Piga, Claudio A, 2016. "Are all online hotel prices created dynamic? An empirical assessment," MPRA Paper 75896, University Library of Munich, Germany.
    7. Shohei Kurata & Yasuo Ohe, 2020. "Competitive Structure of Accommodations in a Traditional Japanese Hot Springs Tourism Area," Sustainability, MDPI, vol. 12(7), pages 1-15, April.
    8. Juan L Eugenio-Martin & José M Cazorla-Artiles & Christian González-Martel, 2019. "On the determinants of Airbnb location and its spatial distribution," Tourism Economics, , vol. 25(8), pages 1224-1244, December.
    9. Li Gan & Manuel A. Hernandez & Yanyan Liu, 2018. "Group Lending With Heterogeneous Types," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 895-913, April.
    10. Escobari, Diego & Serrano, Alejandro, 2015. "Reducing Asymmetric Information in Venture Capital Backed IPOs," MPRA Paper 68140, University Library of Munich, Germany.
    11. Martin Falk & Eva Hagsten, 2014. "Output growth and prices of establishments in the Swedish lodging industry," ERSA conference papers ersa14p360, European Regional Science Association.
    12. Yao Amber Li & Joseph Kaboski & Wyatt Brooks, 2016. "Agglomeration and (the Lack of) Competition," 2016 Meeting Papers 1697, Society for Economic Dynamics.
    13. Alemayehu, Fikru K. & Kumbhakar, Subal C. & Landazuri Tveteraas, Sigbjørn, 2022. "Estimation of staff use efficiency: Evidence from the hospitality industry," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    14. Xi Wu & Li Gan, 2023. "Multiple dimensions of private information in life insurance markets," Empirical Economics, Springer, vol. 65(5), pages 2145-2180, November.
    15. Akio Kawasaki & Takao Ohkawa & Makoto Okamura, 2019. "Inter-group competition through joint marketing efforts and intra-group Cournot competition," Journal of Economics, Springer, vol. 128(3), pages 203-224, December.
    16. Beta Septi Iryani & Muhammad Halley Yudhistira & Khoirunurrofik Khoirunurrofik & Djoni Hartono, 2024. "Conformity or differentiation? The effect of competitive strategy on hotel performance," Tourism Economics, , vol. 30(2), pages 522-538, March.
    17. Wyatt J. Brooks & Joseph P. Kaboski & Yao Amber Li, 2016. "Growth Policy, Agglomeration, and (the Lack of) Competition," NBER Working Papers 22947, National Bureau of Economic Research, Inc.
    18. Roberto Gabriele & Enrico Tundis, 2015. "Contesto regionale, struttura economica e impatto delle politiche regionali: il caso degli alberghi in Trentino," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2015(3 Suppl.), pages 37-59.
    19. Roberto Gabriele, & Enrico Tundis, & Enrico Zaninotto, 2015. "Public Subsidies and Development of Hotel Industry: Evidence from a Place-based Policy," DEM Discussion Papers 2015/10, Department of Economics and Management.
    20. Douglas MacKinnon & Martin Pavlovič, 2023. "Proprietary Varieties’ Influence on Economics and Competitiveness in Land Use within the Hop Industry," Land, MDPI, vol. 12(3), pages 1-12, March.
    21. Diego Escobari & Manuel A. Hernandez, 2019. "Separating Between Unobserved Consumer Types: Evidence From Airlines," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 1215-1230, April.

    More about this item

    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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