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

Ennis, Sean ORCID:, Ivaldi, Marc and Lagos, Vicente (2023) Price parity clauses for hotel room booking: Empirical evidence from regulatory change. The Journal of Law and Economics, 66 (2). pp. 309-331. ISSN 0022-2186

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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. First, a broad EU intervention narrowed the breadth of obligations under price-parity clauses between hotels and major online travel agencies (OTAs). Second, France and Germany went further and eliminated all price-parity agreements for top OTAs. Using transaction data from hotel chains, we find that direct sales by hotels to customers became relatively cheaper than OTA sales for midlevel and luxury hotels. Comparisons with hotel pricing outside the European Union confirm the relative reduction in prices for midlevel and luxury hotels and an opposite pattern for budget hotels. Overall, regulating MFN clauses resulted in significantly cheaper direct-channel sales in two of three hotel types. Primary effects come from the narrow price-parity intervention and not from complete elimination of MFN clauses.

Item Type: Article
Additional Information: Funding Information: This project was funded by the French National Research Agency (Future Investment program grant ANR-17-EURE-0010).
Uncontrolled Keywords: economics and econometrics,law ,/dk/atira/pure/subjectarea/asjc/2000/2002
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Faculty of Social Sciences > Research Groups > Responsible Business Regulation Group
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Depositing User: LivePure Connector
Date Deposited: 13 Mar 2023 16:30
Last Modified: 03 Nov 2023 03:18
DOI: 10.1086/723456

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