Industry Structure, Segmentation, and Quality Competition in the U.S. Hotel Industry

R. Andrew Butters and Thomas N. Hubbard

Journal of Industrial Economics, 2023, vol. 71, issue 2, 491-537

Abstract: We examine how quality competition affects the relationship between market size and industry structure at the product level using evidence from the U.S. hotel industry. Starting in the early 1980s, quality competition for business travelers became more based on variable and less on fixed costs, and became less scale intensive. Since then, market size increases have been met by more, but smaller, hotels in business travel destinations but continued to be met by larger hotels in personal travel destinations. Our results illustrate how the way consumers benefit from increases in market size depends on how firms compete.

Date: 2023
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Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

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