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Risk and disintermediation in tourism

  • Arne Wiig

Tourism is an information-intensive market, characterised by asymmetric information between service providers and the customer. Intermediaries have traditionally played an important role as certifiers of products, and the revenue retention rate has been low, particularly for service providers in developing countries. This article analyses the conditions under which direct marketing on the Internet facilitates disintermediation in tourism. Disintermediation and the profitability of using the Internet differ across markets according to available complementary factors such as human capital, technology and social capital. I will show that direct marketing on the Internet must be complemented by trust-enhancing institutions. These institutions do not exist in many developing countries, making disintermediation less likely. I have conducted an econometric analysis of the hotel industry in 120 countries, examining the relationship between direct marketing and risk. Direct marketing decreases with uncertainty, when controlling for third variables (such as income level, PC penetration and education). A previous version of this article was presented at the Nordic Conference in Development Economics, Göteborg, 17-18 June 2004. I am grateful for comments from Henri de Groot, Magnus Hatlebakk, Christer Ljungwall, Zijian Steven Wang, Ivar Kolstad, Espen Villanger, Gaute Torsvik and Hildegunn Nordås. Any remaining errors are mine alone. Arild Spissøy has provided research assistance.

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Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number WP 2004: 6.

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Length: 19 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:chm:wpaper:wp2004-6
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  1. Caselli, Francesco & Coleman II, Wilbur John, 2001. "Cross-Country Technology Diffusion: The Case of Computers," CEPR Discussion Papers 2744, C.E.P.R. Discussion Papers.
  2. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  3. John Humphrey & Hubert Schmitz, 1998. "Trust and inter-firm relations in developing and transition economies," Journal of Development Studies, Taylor & Francis Journals, vol. 34(4), pages 32-61.
  4. Chinn, Menzie David & Fairlie, Robert W, 2004. "The Determinants of the Global Digital Divide: A cross-country analysis of computer and internet penetration," Center for Global, International and Regional Studies, Working Paper Series qt6hz053p3, Center for Global, International and Regional Studies, UC Santa Cruz.
  5. Röller, Lars-Hendrik & Waverman, Leonard, 2000. "Telecommunications Infrastructure And Economic Development: A Simultaneous Approach," CEPR Discussion Papers 2399, C.E.P.R. Discussion Papers.
  6. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  7. James Jr., Harvey S., 2002. "The trust paradox: a survey of economic inquiries into the nature of trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 291-307, March.
  8. Sjoerd Beugelsdijk & Henri L.F. de Groot & Anton B.T.M. van Schaik, 2004. "Trust and economic growth: a robustness analysis," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 118-134, January.
  9. Harvey James, 2002. "The Trust Paradox: A Survey of Economic Inquiries Into the Nature of Trust and Trustworthiness," Microeconomics 0202001, EconWPA.
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