Booking in the Rain. Testing the Impact of Public Information on Prices

Paolo Figini, Simona Cicognani and Lorenzo Zirulia

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2023, vol. 9, issue 3, No 18, 1329-1364

Abstract: Abstract Weather forecasts are a rare example of public information which is, at the same time, relevant for agents' decisions and entirely exogenous for both sides of the (tourism) market. We develop a model where signals of good weather have a positive impact on accommodation prices, the effect being stronger the higher the accuracy of the forecast and the ex-ante uncertainty in weather conditions. Using data from a sea and sun destination, we estimate an augmented hedonic price model and find that results robustly support the theory. We also find that the response of prices to weather forecasts is larger for upper-scale hotels than for low- and mid-scale hotels, a result we link to the superior pricing capability of the former.

Keywords: Information uncertainty; Bayesian model; Pricing strategy; Hotels; Weather forecast; Hedonic price (search for similar items in EconPapers)
JEL-codes: D83 L11 L83 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Booking in the Rain: Testing the impact of public information on prices (2019)
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DOI: 10.1007/s40797-022-00199-y

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