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Evaluation of best price clauses in online hotel booking

Author

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  • Hunold, Matthias
  • Kesler, Reinhold
  • Laitenberger, Ulrich
  • Schlütter, Frank

Abstract

We analyze the best price clauses (BPCs) of online travel agents (OTAs) using meta-search price data of nearly 30,000 hotels in different countries. We find that BPCs influence the pricing and availability of hotel rooms across online sales channels. In particular, hotels publish their offers more often at Booking.com when it does not use the narrow BPC, and also tend to promote the direct online channel more actively. Moreover, the abolition of Booking.com's narrow BPC is associated with the direct channel of chain hotels having the strictly lowest price more often.

Suggested Citation

  • Hunold, Matthias & Kesler, Reinhold & Laitenberger, Ulrich & Schlütter, Frank, 2017. "Evaluation of best price clauses in online hotel booking," DICE Discussion Papers 278, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:278
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    References listed on IDEAS

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    1. Babur De los Santos & Matthijs R. Wildenbeest, 2017. "E-book pricing and vertical restraints," Quantitative Marketing and Economics (QME), Springer, vol. 15(2), pages 85-122, June.
    2. Lu, Qiang (Steven) & Yang, Yupin & Yuksel, Ulku, 2015. "The impact of a new online channel: An empirical study," Annals of Tourism Research, Elsevier, vol. 54(C), pages 136-155.
    3. Yuriy Gorodnichenko & Oleksandr Talavera, 2017. "Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration," American Economic Review, American Economic Association, vol. 107(1), pages 249-282, January.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, September.
    5. Johansen, Bjørn Olav & Vergé, Thibaud, 2017. "Platform price parity clauses with direct sales," Working Papers in Economics 01/17, University of Bergen, Department of Economics.
    6. Justin P. Johnson, 2017. "The Agency Model and MFN Clauses," Review of Economic Studies, Oxford University Press, vol. 84(3), pages 1151-1185.
    7. Benjamin Edelman & Julian Wright, 2015. "Price Coherence and Excessive Intermediation," The Quarterly Journal of Economics, Oxford University Press, vol. 130(3), pages 1283-1328.
    8. Andre Boik & Kenneth S. Corts, 2016. "The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry," Journal of Law and Economics, University of Chicago Press, vol. 59(1), pages 105-134.
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    Citations

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    Cited by:

    1. 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.
    2. Hunold, Matthias & Kesler, Reinhold & Laitenberger, Ulrich, 2018. "Hotel rankings of online travel agents, channel pricing and consumer protection," DICE Discussion Papers 300, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Maruyama, Masayoshi & Zennyo, Yusuke, 2020. "Platform most-favored-customer clauses and investment incentives," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    4. Ennis, Sean & Ivaldi, Marc & Lagos, Vicente, 2020. "Price Parity Clauses for Hotel Room Booking: Empirical Evidence from Regulatory Change," CEPR Discussion Papers 14771, C.E.P.R. Discussion Papers.
    5. Song, Boqian & Li, Michael Z.F. & Zhuang, Weifen, 2021. "Dynamic channel control and pricing of a single perishable product on multiple distribution channels," European Journal of Operational Research, Elsevier, vol. 288(2), pages 539-551.
    6. Andrea Mantovani & Claudio Piga & Carlo Reggiani, 2019. "Much ado about nothing? Online platform price parity clauses and the EU Booking.com case," The School of Economics Discussion Paper Series 1909, Economics, The University of Manchester.
    7. Wals, Francisca & Schinkel, Maarten Pieter, 2018. "Platform monopolization by narrow-PPC-BPG combination: Booking et al," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 572-589.
    8. Shen, Bo & Wright, Julian, 2019. "Why (don’t) firms free ride on an intermediary’s advice?," International Journal of Industrial Organization, Elsevier, vol. 64(C), pages 27-54.
    9. Danial Asmat & Chenyu Yang, 2019. "An Empirical Analysis of Minimum Advertised Price Restrictions," Working Papers 19-07, NET Institute.
    10. Marin-Pantelescu Andreea, 2018. "Improving Hotel Services in Romania Using Marketing Campaigns," International Conference on Marketing and Business Development Journal, The Bucharest University of Economic Studies, vol. 1(2), pages 56-68, December.
    11. Cazaubiel, Arthur & Cure, Morgane & Johansen, Bjørn Olav & Vergé, Thibaud, 2020. "Substitution between online distribution channels: Evidence from the Oslo hotel market," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    12. Matthias Hunold & Reinhold Kesler & Ulrich Laitenberger, 2020. "Rankings of Online Travel Agents, Channel Pricing, and Consumer Protection," Marketing Science, INFORMS, vol. 39(1), pages 92-116, January.

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    More about this item

    Keywords

    best price clauses; hotel booking; MFN; OTA; vertical restraints;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • 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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