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Price parity clauses for hotel room booking: empirical evidence from regulatory change

Author

Listed:
  • Sean Ennis

    (UEA - University of East Anglia [Norwich])

  • Marc Ivaldi

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Vicente Lagos

    (IP Paris - Institut Polytechnique de Paris)

Abstract

This paper examines the impact of most favored nation (MFN) clauses on retail prices, taking advantage of two natural experiments that changed vertical contracting between hotels and major digital platforms. The broad E.U. intervention narrowed the breadth of "price parity" obligations between hotels and major Online Travel Agencies (OTAs). Direct sales by hotels to customers subsequently became relatively cheaper. Comparisons with hotel pricing outside the E.U. confirm the reduction in prices for mid-level and luxury hotels. France and Germany went further and eliminated all price-parity agreements. This stronger intervention was associated solely with a significant additional price-reducing effect for mid-level hotels in Germany. Overall, wide MFNs are associated with higher retail prices. Regulating MFNs reduced prices with primary effects coming either from the narrow price-parity intervention or, perhaps, from direct sales becoming cheaper than OTAs in both E.U. and non-E.U. countries, and, interestingly, not from complete elimination of MFNs.

Suggested Citation

  • Sean Ennis & Marc Ivaldi & Vicente Lagos, 2023. "Price parity clauses for hotel room booking: empirical evidence from regulatory change," Post-Print hal-04315828, HAL.
    • Handle: RePEc:hal:journl:hal-04315828
    DOI: 10.1086/723456
    Note: View the original document on HAL open archive server: https://hal.science/hal-04315828
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    References listed on IDEAS

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    Cited by:

    1. Sarah Legner, 2022. "Distribution Agreements In The Digital Economy – A Competition Law’S Perspective," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 16(1), pages 61-69.
    2. Carlotta Mariotto & Marianne Verdier, 2020. "Platform–merchant competition for sales services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(4), pages 834-853, October.
    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. David Ronayne & Greg Taylor, 2022. "Competing Sales Channels with Captive Consumers," The Economic Journal, Royal Economic Society, vol. 132(642), pages 741-766.
    5. Mantovani, Andrea & Piga, Claudio A. & Reggiani, Carlo, 2021. "Online platform price parity clauses: Evidence from the EU Booking.com case," European Economic Review, Elsevier, vol. 131(C).

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    More about this item

    Keywords

    Price Parity Clause (PPC); Most favored nation (MFN); Most favored customer (MFC); Hotel Industry; Impact Evaluation; Online Travel Agency (OTA); Digital platforms;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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