Shirking with good reputation? Evidence from hotel industry

Fang-Chang Kuo

International Journal of Industrial Organization, 2024, vol. 97, issue C

Abstract: This paper investigates the relationship between reputation and investment in quality within the hotel industry. Utilizing a panel dataset of hotel investment expenditures and online consumer ratings, I employ a regression discontinuity design, which leverages TripAdvisor's rating display system to identify the causal relationship between online ratings and hotels' investment decisions. The empirical findings indicate that higher ratings negatively impact investment expenditures, whereas lower ratings tend to stimulate investment. This observed shirking behavior among hotels with better ratings may be ascribed to diminishing marginal returns on investment and reduced competitive pressures.

Keywords: Reputation; Investment; Regression discontinuity design; Hotel industry (search for similar items in EconPapers)
JEL-codes: D25 L15 L83 Z31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:97:y:2024:i:c:s0167718724000432

DOI: 10.1016/j.ijindorg.2024.103088

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